ECB Prepares for Interest Rate Cuts Amid Eurozone Recession Risks
The European Central Bank (ECB) is expected to cut interest rates to tackle weak eurozone growth despite inflation concerns. A unanimous vote for a 25 basis point cut is anticipated. Market conditions favorable to easing, but complications, including potential US-EU trade tensions, may influence future decisions.
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The European Central Bank (ECB) is poised to reduce interest rates on Thursday, addressing feeble economic growth while overlooking persistent inflation concerns. Despite slashing borrowing costs multiple times last year, the ECB is considering further cuts with three to four anticipated in 2025.
The eurozone's struggle with industrial recession and lackluster consumption bolsters the argument for a rate cut. ECB President Christine Lagarde is expected to maintain a stance favoring policy clarity, despite looming trade tensions with the US. Market analysts, such as Piet Haines Christiansen from Danske Bank, note the ECB's comfort level with current market pricing conditions.
However, potential complications arise as US protectionist policies, including threatened trade tariffs, could unsettle growth and provoke a response from the ECB. With inflation above the target, board member Isabel Schnabel highlights the nearing point where further cuts may need reevaluation, indicating ongoing debates within the bank.
(With inputs from agencies.)