ECB Expected to Reduce Interest Rates in 2nd Quarter

According to a recent survey reported by FT, around 60 percent of respondents believe that inflation will reach the 2 percent threshold in 2024. However, some experts have also warned that inflation could accelerate after this date.

Fritzi Köhler-Geib, Chief Economist of the German state development bank KfW, has stated, “Inflation may soon fall below 2 percent in the second quarter of 2024. Still, the inflation rate will be slightly above 2 percent for most of the year.”

Surprisingly, only two out of 48 economists surveyed expect the European Central Bank (ECB) to begin reducing interest rates in the first three months of 2024, despite investors pricing the likelihood of such a move at more than 50 percent in March.

Davide Oneglia, the Head of European and Global Macro at TS Lombard, emphasized the importance of acting swiftly, stating, “Acting too slowly in cutting rates could do more damage to the ECB’s credibility than failing to raise rates quickly in response to an energy shock.”

These predictions and expert opinions come at a time when economic uncertainty is looming, and central banks are expected to continue playing a crucial role in shaping monetary policies to mitigate potential risks and maintain economic stability.

 

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