European Central Bank to Cut Interest Rate Again This Week

The European Central Bank (ECB) is expected to cut its benchmark deposit rate by a further quarter point to 2.75 percent on Jan. 30, its fourth reduction in a row.

The ECB hiked interest rates repeatedly from mid-2022 to tame soaring inflation, but is now bringing them back down as price rises slow and the eurozone economy looks weak.

There were some concerns after inflation ticked up again. It rose to 2.4 percent in December, after having fallen below the ECB's 2 percent target several months earlier.

But, despite the somewhat bumpy path towards their goal, ECB officials remain convinced they are on the right path.

"We are confident of seeing inflation at target in the course" of this year, President Christine Lagarde said last week in an interview with CNBC at the World Economic Forum in Davos.

The ECB's decision will come a day after the Federal Reserve issues its latest call, with markets expecting the U.S. central bank to hold rates steady, while also watching for its views on the outlook under Trump.

ING bank analyst Carsten Brzeski said a reduction in borrowing costs at the ECB's meeting "looks like a no-brainer," and officials appeared to be "looking through this temporary acceleration of inflation."

Policymakers' focus has shifted in recent times to the fading economic fortunes of the eurozone, as higher borrowing costs increasingly weigh on households and businesses.

At its last meeting in December, the ECB trimmed its eurozone growth forecast for 2024 to just 0.7 percent, and also cut its estimates for the following two years.

Source: HDN