“The ECB continues to ease rates as the Eurozone economy stalls” says Yael Selfin, Chief Economist at KPMG.
"Today’s decision to cut interest rates signals a clear consensus within the Governing Council to steadily shift monetary policy away from restrictive levels. The ECB’s stance contrasts with the more cautious approach of the Fed, which chose to hold rates yesterday, reflecting stronger growth expectations and more upside risk for inflation.
"The latest data shows the Eurozone economy stagnated in the final quarter of 2024, with activity weighed down by a combination of cyclical and structural challenges. Growth outturn came in below the ECB’s latest projections, and with forward looking indicators pointing to continued sluggish activity at the start of the year, it is likely that the ECB will downgrade its growth outlook in the March meeting.
“The statement remained largely unchanged from December, with the ECB opting against issuing clear forward guidance. This underscores the differing views within the Governing Council on whether interest rates should fall below the neutral estimate range and the need to maintain policy flexibility amidst an uncertain external environment. However, with the disinflation process progressing as expected and downside risks to growth intensifying, the doves on the Council are set to have a stronger case for cutting rates below neutral. We expect the key deposit rate to fall to 1.75% by the end of 2025."
