The European Central Bank (ECB) is likely to cut interest rates further next year and is in line with market expectations for future interest rates, ECB policymaker and Bank of France chief Francois Villeroy de Galhau said on Friday, the 13th of December, after the ECB cut its key interest rate to 3.0% on Thursday, reflecting progress in taming both inflation and growing concerns about the state of the economy, reports Reuters.
The ECB on Thursday cut interest rates for the fourth time this year and left open the possibility that they could be cut further, with the eurozone economy facing political instability and the risk of a new trade war with the US.
“The rate cuts will continue into next year,” Villeroy told business radio BFM.
“There is no pre-determined path in terms of the trajectory of rates… I note that we are generally quite comfortable with the financial markets’ interest rate forecasts for next year,” he added.
The ECB has cut rates sharply as inflation concerns have eased, but there is growing debate about whether the cuts are fast enough to support a struggling economy. Amid fears of a recession, some policymakers on Thursday even called for rates to be cut further, by 0.5%, with ECB President Christine Lagarde stressing the “uncertainty” that exists.
However, the ECB decided to cut rates by 0.25%, bringing the deposit rate, which determines the cost of borrowing in the 20-nation euro area, down to 3%.
The central bank also reversed an earlier announcement that interest rates would be reined in, which economists believe means it could cut rates soon, possibly starting in January, as inflation is expected to hit the ECB’s 2% target in early 2025.
“Disinflation process is well on track,” Lagarde told a press conference.
ECB expects more interest rate cuts in 2025
