After cutting interest rates in June, the European Central Bank (ECB) opted to keep them intact at its recent July meeting. The central bank of the European Union is now shifting its attention to September, when another cut seems likely, according to experts.
After hiking interest rates to an all-time high, the ECB opted to reduce the main refinancing rate from 4.50% to 4.25%, the interest rate for the marginal lending facility from 4.75% to 4.50%, and the interest rate for the deposit facility from 4.00% to 3.75% last month. While this was seen as the beginning of a trend of steady rate cuts, the ECB opted to take a balanced approach amid persisting inflation and wage growth.
The annual euro area inflation rate was 2.5% in June, coming down from 2.6% in May and 5.5% from the same period last year. This is still above the ECB’s 2% medium-term target, which the central banks remain focused on achieving in a “timely manner.”
While the ECB said in a press release that it “does not commit itself in advance to a specific interest rate path,” the economists expect another cut in September, followed by further cuts by the end of the year and in 2025.
“According to our central scenario, the next ECB rate cut will be delivered in September and will be followed by a long and gradual sequence of 25 basis points rate cuts per quarter in December, March, June, etc., i.e. the months when new macro projections will be presented,” UBS economist Reinhard Cluse told Reuters.