Analysts expect cautious rate cuts by ECB amid inflation fears

(MENAFN) Economic analysts anticipate that the European Central Bank (ECB) will adopt a cautious approach in reducing interest rates due to concerns about potential inflation spikes stemming from political unrest in Europe. A survey revealed that analysts expect the ECB's Governing Council to maintain current interest rates in the upcoming week after a recent reduction of a quarter of a percentage point. The analysts forecast that the ECB will continue to lower rates by a quarter of a percentage point each time, beginning in September, with the goal of reaching 2.5 percent within a year.

In a joint interview with European economic newspapers, ECB President Christine Lagarde reaffirmed the bank's projection that it can achieve its medium-term inflation target of 2 percent by the next year. This cautious outlook is shaped by the need to balance rate cuts with the risk of inflation resurgence.

Last month, the ECB reduced the interest rate on commercial banks' deposits by 0.25 percentage points, bringing it to 3.75 percent. Concurrently, the interest rate on new funds received by credit institutions was lowered from 4.50 percent to 4.25 percent. These adjustments reflect the ECB's strategy to cautiously navigate the economic landscape while aiming to stabilize inflation and support economic growth amidst ongoing political uncertainties. 

MENAFN15072024000045015682ID1108438862