It is “conceivable” that the European Central Bank will cut interest rates by 25 basis points at its next policy meeting this month, but no more, ECB member Robert Holzmann said in an interview published this Wednesday.
Investors expect the ECB to cut interest rates at each of its next meetings until at least next June, and that the 3.25% deposit rate is now expected to end 2025 at 1.75%, a level sufficiently low – according to many economists – to start stimulating growth.
“According to the current data, I think a reduction of 0.25 percentage points is conceivable (at this month’s meeting) and no more. But this is not yet decided. As always, this depends on the final data we receive,” Holzmann , director of the Austrian National Bank, told the Austrian newspaper Oberoesterreichische Nachrichten.
The general expectation that US President-elect Donald Trump will adopt sweeping import tariffs after he takes office in January is, however, putting upward pressure on inflation expectations, he said.
“We have a newly elected American president casting a shadow over inflation in Europe. Inflation forecasts will probably be improved because of Trump,” he said, adding that the extent of this effect will depend on the policies Trump actually implements.
“Tariffs have two effects. First, everyone becomes poorer because the relative prices of imported goods rise. Second, attempts will likely be made to mitigate these effects through government spending, which will put additional pressure on the budget. Both tariffs will likely increase inflation,” he said.
Source: Terra
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