Experts expect European Central Bank to cut deposit interest rate to 2 percent
Date
10/17/2024 1:19:04 AM
(MENAFN) The European Central bank (ECB) is anticipated to continue its trend of rate cuts during its monetary policy meetings this year, with experts forecasting a potential reduction of the deposit interest rate to as low as 2 percent. This expectation comes amid ongoing economic challenges within the eurozone, prompting discussions about monetary easing.
Market estimates suggest that the ECB may reduce its three main policy rates by 25 basis points during this week’s meeting. Peter Vanden Houte, the chief economist at ING Group, indicated that he expects the bank to implement a 25-basis-point cut in October. He highlighted that the inflation figures for September demonstrate a clear slowdown in inflationary pressures, including in the services sector, while sentiment data reflects weak conditions that suggest the eurozone’s economic recovery is faltering.
Vanden Houte further posited that the pace of monetary easing might accelerate, driven by recent macroeconomic data. He suggested that the ECB could continue to lower rates at each subsequent meeting until the deposit interest rate reaches the target of 2 percent. This approach underscores the central bank's responsiveness to evolving economic conditions.
In a similar vein, Dirk Schumacher, head of European macro research at investment firm Natixis, shared his views with Anadolu, indicating that a 25-basis-point cut in the deposit interest rate is likely at this week’s meeting. He cautioned that while there might not be explicit guidance on future rate trajectories, the overall message from the October meeting will likely convey increased confidence in the inflation outlook.
However, he noted that persistent services inflation remains a concern for the ECB. Schumacher emphasized that moderate wage increases are crucial for a stable and gradual path of rate cuts, reiterating that the ECB might continue to implement 25-basis-point reductions at future meetings until the deposit rate aligns with the 2 percent target by June 2025. He also mentioned that upcoming statements from ECB President Christine Lagarde could reveal a heightened confidence in the bank’s ability to meet its inflation targets.
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