• The European Central Bank is widely expected to deliver a 25-basis-point rate cut on Thursday, rather than a "jumbo" 50-basis-point move previously thought to be on the table.
• Economists nevertheless say downside risks to the euro zone economy and the inflation picture have both increased, set to send the central bank on a faster course of monetary loosening in 2025.
• Macro forecasts broadly are citing high uncertainty around the policies of U.S. President-elect Donald Trump.

The European Central Bank is heading for its final interest rate cut of the year on Thursday — and while the institution is expected to stick to a quarter rather than half-percentage-point trim, economists forecast that a faster pace of monetary loosening lies ahead.

It will still be a crucial meeting to set guidance for the year ahead, not least because ECB staff will release their quarterly macroeconomic projections on growth and inflation. Those forecasts will factor in the highly uncertain global impact of Donald Trump's return to the White House and of his threats of sweeping trade tariffs.

The bloc's central bank has so far lowered its key rate from 4% to 3.25% this year across three 25-basis-point increments between June and October.

The possibility that the ECB could opt for a 50-basis-point cut to round off 2024 seemed firmly in play after the latest autumn meeting, with multiple policymakers telling CNBC that they would remain data-dependent, but that a significant slowdown in euro area inflation and a worsening economic outlook for the bloc could warrant a big move in December.

Money market pricing now suggests little chance of a jumbo trim. As of Wednesday morning, around 29 basis points' worth of cuts had been priced in for December, and economists say the November uptick in negotiated wage growth will warrant caution.

Headline inflation rose back above target in November, climbing to 2.3% from 2% in October. The euro zone economy meanwhile grew at its fastest pace in two years in the third quarter, albeit only at a rate of 0.4%.

"There is no need to hurry up at this stage for the ECB," Sylvain Broyer, chief EMEA economist at S&P Global Ratings, told CNBC's "Squawk Box Europe" on Monday.

"Inflation, at least over the short term, is under control. But as long as labor costs increase above productivity, the ECB should remain on the cautious side, or on the wait-and-see side for cutting rates."

This is likely to translate into a 25-basis-point cut in December, Broyer said, followed by rate reductions at a "quick pace" to take monetary policy to a neutral stance that neither restricts nor stimulates growth.

'Heavy lifting'

Several forecasts see that pace as meaning 25-basis-point cuts at all six of the ECB's meetings in 2025 up to September, taking its key rate — the deposit facility — from 3% to 1.5% as a result.

That includes researchers at Denmark's Danske Bank, who said in a Tuesday note that ECB policymakers would discuss a 50 basis point cut at the December meeting, but would ultimately settle on a smaller move.

They added that they expected a "benign market reaction," even if ECB President Christine Lagarde shifts her messaging in a more dovish direction.

Bank of America Global Research on Tuesday updated its forecast from a pace of rate cuts taking the deposit facility to 2% by June next year, to a clip leading the rate to 1.5% by September.

"With an economy that will be growing at or below trend for most of 2025, we think it will be hard for the ECB to skip a meeting until the [deposit facility] falls slightly below where it sees the neutral rate (2%), to where we see it (1.5%)," BofA strategists said, referring to that middle ground of monetary policy.

The geopolitical backdrop is a key reason for these more dovish 2025 outlooks.

The ECB is bracing for a year of "heavy lifting" to support dwindling euro zone growth, while political instability in the leading German and French economies sends bond yields in these key regions higher, Carsten Brzeski, global head of macro for ING Research, said at an event sharing his 2025 outlook last week.

Under Trump, the U.S. is set to cannibalize the flow of funds into crucial sectors by cutting taxes, deregulating and attracting investment from Europe, Brzeski said, noting that this could be more damaging to the euro zone economy than tariffs. But macro forecasts, including Brzeski's, are broadly citing high uncertainty around what policies Trump will actually deliver.

"Southern European economies will continue to benefit from a post-pandemic tourism boom, and they don't need to compete with Chinese manufacturing. But the first half of the year is also going to be a standstill politically in Germany and France," Brzeski said.

A potential upside surprise for the euro zone could deliver a delayed impact from the recent growth in real incomes and savings, providing strong support for the economy across 2025, Brzeski continued. Conversely, his downside "bold call" envisions Europe lurching toward its own protectionist measures as a backlash to Trump's provisions, "plunging global goods trade into a full-blown trade war."