ECB to Cut Deposit Rate by 25 Basis Points in October and December, Economists Say
The European Central Bank (ECB) is set to lower its deposit rate by 25 basis points on Oct. 17 and again in December, as predicted by over 90% of economists in a Multibagger poll. This comes as euro zone inflation is expected to decline at a faster rate.
Initially, only 12% of economists had forecasted a cut in October. However, after September inflation dropped below 2% and hints from some Governing Council members, including ECB President Christine Lagarde, the majority now anticipates cuts in both October and December.
The ECB is looking to address the slowing inflation and aims to return it to target levels in a timely manner. This shift in monetary policy is expected to include a total of four 25 basis point reductions in the deposit rate for this year, up from the previous prediction of three cuts.
The central bank is likely to lower the deposit rate by another 25 basis points in December, taking it to 3.00%, according to the majority of economists polled. This move is aligned with market expectations and is driven by the need to manage the downside risks to growth.
Overall, the ECB's actions are influenced by the fading inflation pressures and the need to stimulate the economy amid below-trend growth projections for next year. This trajectory is expected to continue with further rate cuts in the coming quarters.
In terms of inflation, the majority of economists foresee a path where the ECB will cut rates twice in the next quarter, followed by two more cuts later in the year. This projection is in line with current market pricing and aims to maintain inflation around the 2% target until at least 2027.
Despite concerns about an economic slowdown, the euro zone economy is expected to grow steadily over the coming year. Germany, however, has experienced stagnation in growth, with predictions indicating a slight expansion in the following quarters.
In conclusion, the ECB's decision to cut the deposit rate is aimed at addressing inflation concerns and stimulating economic growth. Investors and individuals should pay attention to these developments as they can impact financial markets and personal finances. Understanding these changes in monetary policy can help individuals make informed decisions about their investments and financial planning.