Table of Contents:
The current monetary policy environment
The European Central Bank (ECB) recently implemented a further cut in interest rates, bringing the deposit rate to 3%. This decision, the fourth this year, was taken in a context of economic slowdown affecting the entire eurozone. Analysts are now wondering how the ECB intends to continue its monetary policy and what the consequences will be for the
European economy.
The ECB’s statements and future expectations
In the press release that followed the meeting, the ECB removed the reference to a restrictive policy, adopting a ‘data dependent’ approach. This means that future decisions will be based on updated economic data, rather than on a predefined plan. Christine Lagarde, president of the ECB, stressed the importance of monitoring the euro’s performance and left open the possibility of further rate cuts, if necessary
.
The experts’ forecasts
According to several experts, the ECB’s expansionary policy will continue throughout 2025. Konstantin Veit of PIMCO has indicated a terminal rate of around 1.75% for the second half of next year, considered a neutral target for the eurozone. Martin Wolburg of Generali Investments also confirmed this forecast, highlighting that there is still room for further cuts. Dean Turner of UBS Global Wealth Management warned that the easing of inflationary pressures could push the ECB to continue the cuts until June 2025, bringing the deposit rate to 2%
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The implications for the European economy
The monetary policies of the ECB have a direct impact on the European economy. Lower interest rates can stimulate economic growth, encouraging lending and investment. However, there is also the risk that a policy that is too expansionary could fuel inflation. Experts warn that the ECB will need to carefully balance its decisions to avoid compromising long-term economic stability
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