(Bloomberg) -- Europe’s sputtering economy is causing traders to bet on a faster pace of interest rate cuts next year. 

For the first time, money markets have priced in a full percentage point of interest-rate cuts in 2024. Just two months ago, the expectation was that the European Central Bank would deliver a 75 basis-point decrease, according to swaps pricing tied to central bank meeting dates. 

Bets on similar easing by the Bank of England accelerated Friday after weaker-than-forecast UK retail sale numbers. Traders are also anticipating 100 basis points of cuts by the Federal Reserve next year, with signs of cooling US price pressures on show this week. Plus, oil’s descent into a bear market has reignited worries about a recession.

ECB policymakers have begun to debate the timing of potential rate cuts, though that discussion has incited some pushback. Greek central bank Governor Yannis Stournaras has said that officials could consider easing in the second half of 2024, while his German colleague, Joachim Nagel, has vehemently pushed back on that prospect.

“I don’t like this discussion going on about when will be the point you lower interest rates,” the Bundesbank president said last week. “This discussion is not helpful it is much, much too early.” Nagel is scheduled to speak again later on Friday.

For her part, ECB President Christine Lagarde said last week that any such reduction isn’t going to happen “in the next couple of quarters,” adding that “long enough is long enough.” She omitted the topic from a speech in Frankfurt on Friday.

As evidence builds that an aggressive string of rate hikes is starting to take a toll on the economy, it’s becoming harder to convince the market to follow the mantra of “higher for longer.” Germany’s 10-year yield has fallen almost 20 basis points this week to about 2.55% and the Stoxx 600 Index touched a one-month high on Friday.

Read more: ECB’s Villeroy Says Slowing Inflation Justifies Halting Hikes

Wagers by traders around the world that pull forward the timing of rate cuts are causing some unusual market dynamics, according to Steven Barrow, head of G-10 strategy at Standard Bank. Swaps pricing suggests that there’s a high probability that the Fed will start cutting rates from May, with the ECB following suit a month later and the BOE starting in August, he said. 

“We think it is wrong,” Barrow wrote in a note on Friday. “We find it strange that the market prices such an early Fed move when the economy is so much more robust than that we see in Europe.” 

In his view, the Fed will hold off on rate cuts until the third quarter, while the ECB and BOE may act in the second quarter.

--With assistance from James Hirai, William Horobin, Sonja Wind, Alexander Weber, Craig Stirling and Greg Ritchie.

(Updates with UK markets and context, starting in the third paragraph.)

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