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European Central Bank Pushes Back Interest Rate Cuts

The European Central Bank (ECB) will hold off on introducing interest rate cuts on Thursday, keeping rates at a record high. While the ECB has not implemented rate hikes since September, it remains adamant that a reversal would be premature given that price pressures persist. ECB President Christine Lagarde is expected to refer to such price rises in defence of deferring rate cuts.

Despite the ECB’s concerns, investors are largely expecting rate cuts to arrive in the near term due to a belief that the central bank is acting too pessimistic in its inflation outlook. Financial markets are betting that a total of 127 basis points of rate cuts will be introduced throughout the course of the year, with the first being between April and June.

“Our view remains that the weak growth outlook – with activity below potential for many quarters ahead – and falling inflation will mean cuts can happen sooner rather than later,” Peter Goves, at MFS Investment Management commented.

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