“European Central Bank ends year on the front foot as growth concerns mount” says Yael Selfin, Chief Economist at KPMG:
“The ECB cut interest rates for the fourth and final time this year as it shifts its focus from combatting inflation to supporting the Eurozone economy. Inflation risks have receded but activity in the Eurozone economy remains sluggish. Downside risks to the growth outlook have also intensified in recent months, including potential global trade frictions which could hamper some of the export dependent countries.
“Today’s decision to cut interest rates, combined with the more dovish tone in the statement, underscores the change in strategy by the ECB. Crucially, the ECB reiterated its data dependant approach, however, the statement dropped reference to keeping interest rates in restrictive territory. The Governing Council will have been wary of weak economic activity and high borrowing costs contributing to inflation undershooting its target in the medium term.
“Monetary policy alone will not be sufficient to remedy the Eurozone’s underlying economic challenges. Nonetheless, the ECB will want to avoid being behind the curve given the uncertain economic outlook. We expect the ECB to accelerate the pace of cuts next year and see interest rates falling to 1.75% by the end of 2025.”
