(Bloomberg) -- Traders are growing increasingly confident the European Central Bank will cut interest rates again next month as evidence mounts the economy is weakening.

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Money markets imply a roughly 60% chance of a quarter-point reduction in October, up from around 20% last week. The latest leg of the repricing was driven by US data that showed consumer confidence unexpectedly fell in September.

The ECB has lowered borrowing costs twice this year and at their last meeting said further reductions will depend on incoming data. Traders so far have largely taken the view that policymakers would cut rates once a quarter but that calculus is quickly changing as data points to a teetering economy — euro-area private sector activity contracted for the first time since March and Germany’s business outlook worsened again.

“The incoming euro-area data strengthen our conviction that the ECB will speed up the pace of rate cuts to consecutive steps,” Goldman Sachs Group Inc. economists led by Sven Jari Stehn wrote in a note. “An October cut is quite possible with further dovish news.”

A large half-point cut from the Fed last week has raised concern over the outlook of the global economy more generally and piled pressure on ECB officials not to fall behind in lowering rates. Governing Council member Madis Muller said on Tuesday he isn’t “totally” ruling out another interest-rate cut next month.

“Even if the ECB decides to skip cutting rates again in October, market participants are likely to anticipate that it is only a matter of time before the ECB has to speed up rate cuts by delivering a larger 50bps in December,” said Lee Hardman, a strategist at MUFG.

Traders are betting on 48 basis points of easing through the two remaining ECB meetings of the year, from about 37 basis points a week ago. For the next year, markets imply about 120 basis points of additional cuts, potentially bringing the deposit rate below 2%.

The repricing has boosted short-dated European government bonds and normalized a key segment of the German yield curve. The rate on two-year bunds fell below the 10-year equivalent on Monday, bringing the spread between the two tenors above zero for the first time since November 2022.

The disinversion of the curve “indicates rising recession risks, as markets now expect the ECB to pivot toward rate cuts to support the slowing economy,” Althea Spinozzi, Saxo Bank AS’s head of fixed income strategy, wrote in a note.

German two-year yields — among the most sensitive to changes in monetary policy — are down 29 basis points so far this month to trade at 2.10%, the lowest since December 2022. The rate is on course for a fourth month of declines, which would be the longest stretch since 2019.

“It seems unlikely that the talking point of a potential ECB rate cut is going to fizzle out easily,” Lloyds Bank Plc strategists including Sam Hill wrote in a note.

(Updates prices and adds US confidence data in the second paragraph.)

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