The European Central Bank (ECB) Keeps Interest Rates Unchanged at 4% - Deutsche Bank Research Analysts Predict Two Rate Cuts in 2024
The European Central Bank (ECB) has maintained its interest rates at 4% since September 2023, according to analysts at Deutsche Bank Research. The analysts predict that the ECB will continue its easing cycle with two more rate cuts in 2024, with 25bp cuts expected in September and December. The terminal rate is projected to reach a landing zone of 2.00-2.50% in 2025 or early 2026.
To facilitate quicker and more substantial rate cuts, the ECB must navigate various critical conditions. These include concerns about medium-term inflation risks, the possibility of a hard landing for the economy, the stability of inflation expectations, weaker labor market conditions, and potential fiscal tightening.
The ECB's stance on inflation being transitory or persistent is also crucial, as well as the concept of the neutral rate. The bank's previous experience with rapid rate hikes suggests that it could also cut rates quickly if necessary. Additionally, the current policy stance could prompt faster rate cuts if financial conditions were to tighten sharply.
Analysts at Deutsche Bank Research suggest that while the market anticipates modest rate cuts in September and December, there is room for a more aggressive approach if downside risks become more pronounced. The ECB will continue to monitor evolving data and economic conditions closely, with any shift towards weaker inflation and growth potentially prompting faster rate reductions.
In conclusion, the ECB's decisions on interest rates can have a significant impact on the economy and financial markets. As an investor or individual, it is essential to stay informed about these developments and consider how they may affect your investment decisions and overall financial well-being.