Forex – The European Central Bank (ECB) will not react to the weakening eurozone economy by cutting interest rates faster, according to a survey of analysts.
Respondents to a Bloomberg survey expect the ECB to cut the deposit rate next week, following its first in June, and maintain that three-month pace until it reaches 2.5% in September. They expect borrowing costs to remain at this level until 2026.
Dennis Shen, an economist at Scope Ratings, said the recent fragility in the 20-nation bloc “strengthens the argument for more accommodative monetary policy.” More than one person expects Leader Christine Lagarde to give clear signals on where interest rates will go, given the ECB’s emphasis on assessing incoming information. Lagarde may keep all options open given the divergent views on economics within the governing board.
“Lagarde’s real challenge is to present a balanced policy picture despite the differences in views, which can be achieved by continuing to emphasize a data-driven approach and not committing to any particular interest rate path in advance,” said Jussi Hiljanen, SEB strategist.
