ECB toward meeting to decide next steps in eu monetary policy
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There is great apprehension for the European Central Bank’s meeting on March 6th, which will take place in Frankfurt. Markets are awaiting the latest economic projections on GDP and inflation. Analysts predict further cuts to the reference interest rate, as the ECB may reduce the cost of money, bringing the deposit rate to 2.50% and the reference rate to 2.65%. Meanwhile, analysts are focusing on the main goal that European Central Bank needs to achieve: keeping price dynamics under control.
ECB's options
At the moment, the European Central Bank has several options to consider: it could halt the easing cycle, push for a neutral interest rate — given the fragility of the growth outlook — or maintain the current pace, hoping no further obstacles arise. According to Isabel Schnabel, a member of the ECB’s executive board, the European Central Bank should begin to consider suspending or stopping rate cuts.
Inflation and Prospects for 2025
Overall inflation doesn’t look like it’ll be coming down, as it stood at 2.4% in February — down from 2.5% in January — but it has not yet returned to the 2% recorded in October, unlike core inflation, which dropped from 2.7% to 2.6%. To reach the 2% target over the next ten months, a stable core inflation level will be necessary. For instance, maintaining a growth rate of 2.2% will be crucial to meet projections estimating a reduction to 2.3%.
The ECB’s quarterly forecasts on growth and inflation are also expected, therefore markets are largely focused on the future pace of rate cuts. The ECB will need to act cautiously to avoid a potential reversal of the economic cycle.
ECB's options
At the moment, the European Central Bank has several options to consider: it could halt the easing cycle, push for a neutral interest rate — given the fragility of the growth outlook — or maintain the current pace, hoping no further obstacles arise. According to Isabel Schnabel, a member of the ECB’s executive board, the European Central Bank should begin to consider suspending or stopping rate cuts.
Inflation and Prospects for 2025
Overall inflation doesn’t look like it’ll be coming down, as it stood at 2.4% in February — down from 2.5% in January — but it has not yet returned to the 2% recorded in October, unlike core inflation, which dropped from 2.7% to 2.6%. To reach the 2% target over the next ten months, a stable core inflation level will be necessary. For instance, maintaining a growth rate of 2.2% will be crucial to meet projections estimating a reduction to 2.3%.
The ECB’s quarterly forecasts on growth and inflation are also expected, therefore markets are largely focused on the future pace of rate cuts. The ECB will need to act cautiously to avoid a potential reversal of the economic cycle.