Madrid, June 2 (EFECOM).- The persistence of inflation and the solidity of the European and American economies have clouded the forecasts of analysts, who only assume that the European Central Bank (ECB) will begin to cut interest rates. interest next Thursday.
Analysts have doubts about the ECB’s next steps and are cautious when predicting the path along which the US Federal Reserve’s monetary policy will take.
Regarding the next meeting of the Governing Council of the ECB, “everything has already been said,” emphasizes Ulrike Kastens, European economist at the German management company DWS.
“On June 6 it should be officially confirmed that the ECB lowers its official interest rate by 25 basis points,” he maintains.
It would be the first cut since March 2016. At that time, the interest rate was left at zero; now it is at 4.5%.
However, Kastens points out, “what matters even more is the way forward” from that moment on.
“The market already expects that the ECB will cut rates next week, although what comes after will be more difficult for the bank to communicate and for the markets to value,” notes Orla Garvey, of Federated Hermes, in the same vein.
According to Kastens, “some central bankers have further rapid interest rate cuts in mind and may already be in favor of another cut in July, while others prefer a more cautious approach.”
The DWS economist opts for the most prudent option taking into account the rise in salaries in Europe and the stability of the labor market.
“In the face of this uncertainty in the evolution of inflation, it is likely that a ‘hawkish’ tone (in favor of a restrictive monetary policy) will prevail,” he ventures.
However, DWS maintains its forecast of three additional rate cuts until the end of March 2025.
According to Orla Garvey, “significant progress” has been made in controlling inflation, but “the future trajectory is likely to be more turbulent.”
Rubén Segura-Cayuela, Bank of America’s chief economist for Europe, is betting on a rate cut of 200 basis points between June of this year and July 2025.
“We are still waiting for the first cut, of 25 basis points, in June. We have plans for cuts of 75 basis points in 2024 and 125 basis points in 2025,” he adds.
In his opinion, it is more likely that the next reduction – after the one in June – will occur in September, and not in July.
Regarding the monetary policy of the US Federal Reserve, which will hold its next meeting in the second week of June, doubts persist.
For Bret Kenwell, analyst at the investment platform eToro, the inflation data released on Friday “gives investors confidence that the Fed will be able to begin cutting rates.”
However, he specifies that the Federal Reserve “will need more than a month of controlled inflation to take the step.”
The Fed “will need to see a sustainable trend toward lower inflation to feel confident enough to lower rates,” he explains.
“At the beginning of this year, many investors were convinced that the Fed would reduce interest rates four times by the end of 2024. At the time, it seemed like wishful thinking; today, considering that inflation has exceeded expectations, I seems even more unlikely,” says Darrell Spence, an economist at Capital Group.
In his opinion, “there is a good chance that there will be no rate cuts this year.”
Last Tuesday, the president of the Minneapolis Federal Reserve, Neel Kashkari, did not rule out a rate hike in the US, a possibility that was put on the table at the last meeting of the Federal Open Market Committee, according to the minutes. of the meeting. EFECOM
mom/ltm
