European Interest Rate Cut Likely in June... "Focus on the Pace of Easing Tightening"

Europe is widely expected to cut its benchmark interest rate in June. Market attention has now shifted to the pace of easing the tightening stance.

[Image source=AFP Yonhap News]

According to a Bloomberg survey conducted from the 27th of last month to the 3rd of this month targeting economists on the European Central Bank (ECB)'s interest rate policy, most respondents expected rate cuts to begin at the June policy meeting. Based on the median of respondents, the current deposit rate of 4% (benchmark rate is 4.5%) is expected to be cut three times by the end of this year to 3.25% per annum, and further cut four more times by the end of next year to 2.25% per annum.

ECB officials are almost unanimous in agreeing that rate cuts will begin in June. Christian Todtmann, an economist at Dekabank, said, "It seems almost certain that rates will be cut in the near future, and now the focus will shift to the pace of rate cuts."

Christine Lagarde, ECB President, has declared that interest rate policy will be strictly determined by economic performance. Yanis Stournaras, Governor of the Bank of Greece, argued last month that two cuts before this summer, totaling four cuts this year, would be reasonable.

In contrast, Robert Holzmann, Governor of the Oesterreichische Nationalbank, who has consistently opposed rate cuts this year, said he does not fundamentally oppose a rate cut in June but that it can only be done if the economic situation permits.

Scholars identified the U.S. presidential election as the single biggest risk affecting the Eurozone economy. They also expressed considerable concern about geopolitical tensions in various regions and rising inflation.

This content was produced with the assistance of AI translation services.