The European Central Bank is expected to lower interest rates for the second time at its Thursday meeting this year, but disagreements among policymakers could increase tariff uncertainty and potential increase in regional defense spending.
A quarter of the meeting in March was lowered, prices in the market were lowered, and the European Central Bank’s key interest rate fell to 2.5%, down from its peak of 4% in mid-last year. By the end of this year, it will be further reduced to 2%.
Over the past nine months, monetary easing is expected to be relatively fast, with the euro zone title inflation rate integrating into Consistently below 3%, and economic growth Stay weak. The ECB’s governing committee almost always makes decisions unanimously and provides relatively firm guidance for guiding the next steps in market expectations.
However, the distances that central banks now appear neither stimulate policies nor restrict the economy, otherwise they are expected to be shelved. Policy makers disagree with the exact level and whether interest rates need to be lowered to that level in response to factors such as low growth.
ECB President Christine Lagarde Tell CNBC in January She believes the range is between 1.75% and 2.25%, between 1.75% and 2.5% from previous estimates, but the ECB itself has shown no stronger signs since then.
Bank of America Global Research analysts said in a Wednesday note that after this week’s meeting, they expect internal disputes among policymakers to increase.
“As the divergence grows, this is the last ‘easy’ rate in our view,” they said. However, they reiterated that by September, the ECB cut its ECB tax rate to 1.5%.
Goldman Sachs analysts said: “The debate among European Central Bank policymakers has been raised in recent weeks. They hope the voted dominant council focuses on a wide range of financial situations, bank loan terms, business reports and loans to show whether interest rates are still restrictive.
Hiking
At the same time, the outlook has caused a sensation in the market and the economy by many factors. Therefore, the macroeconomic forecasts for inflation and growth by ECB employees will be released on Thursday, so it will be under the radar, but can be done with a little salt.
There is a Initiate tariffs Among its largest trading partners, it is expected to slow down global sectors, including cars – but responsibility Maybe come back. U.S. President Donald Trump says EU Will be the next visit to the high duty – But the prospects of negotiations continue to play a role. The impact of such tariffs will also be uncertain, with trade slowing down on economic activity, but it may also suppress the euro, thereby increasing import costs.
Meanwhile, the European government is preparing Hiking expenses As Relationship with the United States on the cracks in Ukraine’s war.
Lagarde may question The deal was announced this week Germany between the next alliance partners expected by the country. A deal on reforming Germany’s debt rules has not been finalized, but is expected to unlock trillions of euros on defense and infrastructure spending, which rallied heavily in news on Wednesday.
Rabobank analysts said the euro’s earnings were “partially due to the expectation that the ECB would be more limited in tax reductions,” and reforms and higher spending brought about “a commitment to higher economic growth.”
Thierry Wizman, Macquarie, Macquarie (Thierry Wizman), Macquarie (Thierry Wizman), Macquarie (Thierry Wizman), Macquarie (Thierry Wizman), Macquarie (Thierry Wizman), Macquarie (Thierry Wizman), Macquarie (Thierry Wizman), Macquarie (Thierry Wizman), Macquarie (Thierry Wizman), said a broader rescheduling to Europe would represent “debt-funded fiscal expansion that would stimulate economic activity and make the ECB reconsider the scope of its future policy rates”.
Still restricted?
Despite all this uncertainty, some analysts do not expect the ECB to update its guidance heavily on Thursday, which is January stressed Inflation is expected to be targeted, monetary policy still has restrictions, and central banks will continue to rely on data.
A particular focus will be on the information that changes to policy are “restrictive” and whether there are any suggestions that interest rates may be held at the next meeting in April.
“In view of the unusual uncertainty caused by ongoing political and geopolitical developments, we expect the ECB’s council this week to push the ECB’s council this week by maximizing the selectivity of follow-up,” Citi analysts said on Wednesday.
“We think this may translate into more cautious communication, no longer asserting that monetary policy is restrictive. We won’t read it. This is a sign that a pause in the relaxation process is coming. However, moving geopolitics may eventually produce fiscal policy for voting rights, but in the near future, they may increase the argument of unit easing.”
