Economists reduce ECB interest rate cut expectations
Economists have begun to lower their expectations for how much the European Central Bank will cut interest rates.
Economists began to reduce their expectations about how much the European Central Bank will cut interest rates after it starts cutting interest rates next week.
Although economists participating in the Bloomberg survey are certain that the first cut in the deposit rate, which is currently 4 percent, will take place next week, they reduced the total interest rate cut expectation from a quarter-point cut seven times to a quarter-point cut six times.
The surprise recovery in the Eurozone economy and continued wage pressures contribute to the expectation of fewer interest rate cuts. AXA Investment Managers Economist Hugo Le Damany, who expects the ECB deposit rate to fall to 2.75 percent a year later with just five quarter-point rate cuts, said: “It will be difficult to argue why this is the right time to cut rates in a period when there is no verbal guidance for further rate cuts.” he commented.
Economists participating in the Bloomberg survey think that the biggest risk facing the Eurozone economy is inflation. Inflation is followed by US elections and geopolitical tensions.