Home » Summary|The European Central Bank is in no rush to announce a timetable for interest rate cuts-Xinhuanet Client

Summary|The European Central Bank is in no rush to announce a timetable for interest rate cuts-Xinhuanet Client

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European Central Bank in No Rush to Announce Timetable for Interest Rate Cuts

The European Central Bank held a monetary policy meeting on January 25th and decided to keep the three key interest rates unchanged. Its latest monetary policy resolution and statement did not provide clear clues on interest rate cuts.

According to the announcement from the European Central Bank, the main refinancing interest rate, marginal lending rate, and deposit mechanism interest rate will remain unchanged at 4.50%, 4.75%, and 4.00% respectively.

European Central Bank President Christine Lagarde stated that Governing Council members generally believe that it is “too early to talk about cutting interest rates” and that the ECB will insist on relying on data to make decisions. Lagarde also mentioned that the euro zone’s economic growth has stalled and the risk of a new round of inflation is low.

Carsten Brzeski, head of ING’s macro research department, predicts that the first interest rate cut in the euro zone will not occur before June this year. This sentiment is shared by Michael Holstein, chief economist of Germany’s Bundesbank, who believes that the European Central Bank will wait until at least the summer to cut interest rates for the first time.

However, some analysts point out that the euro zone is currently on the verge of recession. If inflation fails to decline further, the European Central Bank may not be able to adjust interest rates to stimulate the economy, leading to stagflation.

Frederic Dicroze, an economist at Swiss Pictet Asset Management, believes that the possibility of an interest rate cut in the euro zone before the summer has increased. This sentiment is echoed by Goldman Sachs Group and Deutsche Bank, which expect the European Central Bank to cut interest rates for the first time as early as April this year. Société Générale, on the other hand, doesn’t expect a rate cut until this fall.

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Ulrich Cattell, chief economist of Deka Bank in Germany, believes that the interest rate cut will not be as early or as large as some market investors expect, and a small interest rate cut in the euro zone is the most likely scenario.

The European Central Bank’s latest monetary policy statement is slightly “dovish” and may be preparing for an interest rate cut, according to many experts. Lagarde’s failure to strongly refute market expectations for an interest rate cut sends an important signal that the possibility of an interest rate cut in the euro zone before the summer has increased.

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