The economic projections for the Eurozone point to a continued slowdown in inflation and moderate economic growth, but they do not justify a rate cut beyond the standard 25 basis points. According to David Chappell, Senior Fixed Income Portfolio Manager at Columbia Threadneedle Investments, it is unlikely that the ECB Governing Council will opt for a 50 basis point reduction in the short term.
Chappell remarked, “The ECB is likely to proceed with a gradual approach in upcoming meetings. However, the pace of normalisation may accelerate by spring as the implications of Donald Trump’s trade policy become clearer.”
In a global context marked by high uncertainty, the ECB appears set to maintain an accommodative monetary policy while avoiding drastic measures that could destabilise financial markets. Frankfurt’s decisions in the coming months will be pivotal in supporting growth without creating imbalances in the European banking system.
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