The first rate cut in June brought the interest rate down from 4.5% to 4.25%. this B.C. It should be paused. This is the general view of analysts on the outcome of the Monetary Policy Institute meeting, which will publish the final conclusions of the July meeting tomorrow. The general idea is that Frankfurt will start further rate cuts as early as September, waiting for new data on inflation and economic growth trends.
Analysts’ expectations
That’s his idea. Peter Goves, Head of Developed Markets Sovereign Debt Researchhe wrote in a note:
“Tomorrow we do not expect any changes in the ECB’s interest rates. Since the last meeting, the central bank continues to emphasize a data-dependent approach. The June updated forecasts show a small upward revision of the inflation forecasts for 2024 and 2025 (now 2.3% and 2%, respectively, from 2.5% and 2.2%), with Lagarde stressing the need to analyze a range of data to get more clarity. We still expect two more 25 basis point rate cuts this year.”
Along the same route David Chappell, Senior Fixed Income Portfolio Manager, Columbia Threadneedle Investments It added:
“At the June meeting, B.C. The Fed has cut rates for the first time, but the decision is accompanied by potential uncertainty as wage and inflation data have been weaker than expected. This week’s meeting will end with the confirmation of the current rate, and we expect Lagarde to be less clear on the timing of any future policy activity.”
Kevin TozetteMember Carmignac Investment Committee emphasize instead Signs of a slowdown in Europe:
“Given the uncertainty of the situation, we expect the ECB to maintain the policy rate at the current level (4.25%) and adopt a cautious and evasive approach to future policy indications. Like many other central banks, the ECB is likely to take a summer break. In a few months, the institution will be in a better position to assess the trajectory of inflation and growth in the region and may confirm that the path taken is the desired one. For the Fed, however, the probability of a further rate cut in September is high.”
What to expect in 2024
In general, analysts expect a cautious approach from Frankfurt: most of the financial community is considering two rate cuts, but some do not rule out just one. In particular, a Reuters poll of 85 economists from July 4 to 11 showed that 80% expect rates to remain unchanged tomorrow and then cut twice more this year, in September and December, when they will fall to 3.25%.