The current context of the European economy
In a context of increasing economic uncertainty, the European Central Bank (ECB) is preparing to make crucial decisions regarding interest rates. With inflation showing signs of recovery, rising from 2% in October to 2.3% in November, economists warn that the ECB may need to take stronger measures to stabilize the eurozone economy. The growth, although positive, was modest, with an increase of 0.4% in the third quarter, which raises questions about the sustainability
of this trend.
Expectations for the rate cut
According to forecasts, the ECB could announce a cut in interest rates by 25 basis points at the next meeting. This decision is seen as a necessary response to signs of an economic slowdown and rising inflation. However, some experts, such as Sylvain Broyer of S&P Global Ratings, warn that the ECB should proceed with caution, considering that rising labor costs could negatively affect productivity. The suggested strategy involves a gradual approach, with further cuts expected during 2025, bringing the reference rate from 3% to
1.5%.
Impact of monetary policies on growth
The ECB’s monetary policies not only influence interest rates, but they also have a direct impact on eurozone economic growth. With political instability in key countries like Germany and France, bond yields are rising, creating additional pressure on the markets. Carsten Brzeski of ING Research emphasized that 2025 will be a year of ‘heavy work’ for the ECB, with the aim of supporting growth in a context of global uncertainty. The market reaction will be crucial, and analysts expect that a more accommodating message from president Christine Lagarde could lead to a positive reaction
from investors.