ECB poised for further rate cuts, policymakers forecast

The European Central Bank (ECB) is expected to cut interest rates again in December, with policymakers aiming to balance growth concerns and inflation stability.

Chief Economist Philip Lane said that rates could reach neutral levels by 2025, provided inflation stabilises near the 2 per cent target.

Lane emphasised the need for gradual rate reductions, warning that prolonged restrictive policies could stifle growth.

Markets are predicting a significant half-point cut following weak private-sector activity data, despite inflation possibly rising above the target for November.

Latvian Governing Council member Martins Kazaks supported the move, calling for another rate reduction next month, marking what would be the ECB’s fourth cut this year.

While Lane highlighted improving household incomes and rising wages in the eurozone, he cautioned against risks such as US protectionist policies under a potential Donald Trump presidency, which could disrupt trade and investment in Europe.

Despite ongoing challenges, Lane expressed optimism about a cyclical recovery, anticipating stronger consumption growth in 2025 and beyond.

Attribution: Bloomberg

Subediting: M. S. Salama