Markets anticipate several rate cuts by the ECB in 2025, in order to put the reference rate at “around 2%”a level considered neutral and which does not penalize or support the economy.
The president of the European Central Bank, Christine Lagarde, said this Monday that she foresees in the wake of the easing that began several months ago, in the face of advanced disinflation and increased risks to growth.
“If the data that reaches us continues to confirm our base scenario, which foresees the return of inflation to the 2% objective in 2025 in the Euro Zone, the direction is clear: we intend to reduce interest rates even further”, declared Christine Lagarde during a speech in Vilnius, Lithuania.
“Current monetary policy continues to be restrictive,” he said.
On Thursday, the lowered the reference rate for the fourth time since June, setting it at 3%. ECB rates have a direct impact on the credit interest rates charged by banks to businesses and households.
Markets anticipate several rate cuts by the ECB in 2025, in order to put the reference rate at “around 2%”a level considered neutral and which does not penalize or support the economy.
“Growth prospects weaker than expected”
According to analysts consulted by Agence France Presse, the ECB may follow this path because the environment in the Eurozone has changed since inflation reached more than 10% in autumn 2022.
Two years later, the concern is related to “weaker than expected growth prospects and increased uncertainty associated with geopolitical events”, said Lagarde.
Confident of a “sustainable” return to inflation, the ECB intends to apply an “appropriate” interest rate policy depending on economic data.
It is possible to “return to a situation in which the (monetary) policy horizon can be adjusted according to the nature, scale and persistence of shocks, as necessary”, concluded Lagarde.
