• Sun. Apr 21st, 2024

Economists predict ECB will likely initiate interest rate cuts in June

BySamantha Johnson

Mar 30, 2024
Economists predict ECB will likely initiate interest rate cuts in June

Opinions on how much the central bank will decrease policy rates this year vary among economists. According to a Reuters poll of 77 economists from 25-28 March, the majority believe that the European Central Bank (ECB) will begin cutting interest rates in June. While 68 economists estimate that the key interest rate will remain unchanged in April, they predict a cut will happen in June. The upcoming interest rate meetings of the Council are scheduled for April 11 and June 6.

Interest rate cuts are becoming more relevant as inflation has slowed down significantly, with February’s inflation rate at 2.6 percent compared to 8.5 percent a year prior. Factors contributing to the slowdown include tight monetary policy, easing energy crises, and supply disruptions. The central bank aims for a two percent inflation rate in the medium term, which adds to the speculation of rate cuts in June.

The central bank is expected to have new data on wage development at the beginning of the year in June, which could further support the case for interest rate cuts. Financial markets anticipate a 0.25 percentage point cut in June. While some economists predict a total cut of 1.00 percentage points this year, others believe it will be less, with just under half estimating cuts of 0.75 percentage points or lower.

The varying views and expectations surrounding the central bank’s policy rate cuts indicate uncertainty in the economic outlook and the factors influencing monetary policy decisions.

By Samantha Johnson

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