ECB expected to cut deposit interest rate to 2%, experts say

ISTANBUL

The European Central Bank (ECB) is expected to continue its rate cuts at its monetary policy meetings this year, with experts estimating that the bank could reduce its deposit interest rate to as low as 2%.

According to estimates in the money markets, the ECB is expected to cut its three main policy rates by 25 basis points at this week’s meeting.

Peter Vanden Houte, chief economist at ING Group, told Anadolu that he expects the bank to cut its interest rates by 25 basis points at the October meeting.

Houte stated that September’s inflation figures show “a clear deceleration of inflationary pressures, also in services,” while “sentiment data have been quite weak, suggesting that the economic recovery in the eurozone is coming to a standstill.”

Houte estimates that the pace of monetary easing may accelerate based on recent macroeconomic data, and the ECB may continue to reduce rates at every meeting until the deposit interest rate drops to 2%.

Meanwhile, Dirk Schumacher, head of European macro research at investment firm Natixis, told Anadolu that the ECB may cut its deposit interest rate by 25 basis points at this week’s meeting.

“While there will be no direct guidance with respect to the future rate path, we think that the overall message of the October meeting will be one of increased confidence in the inflation outlook. That said, the stickiness of services inflation remains a thorn in the side for the ECB,” he said.

Schumacher noted that the moderate course of wage increases “remains a necessary condition” for a steady and gradual path of rate cuts.

He emphasized that a 25-basis-point rate cut could be issued at each upcoming meeting until the deposit rate reaches 2% by June 2025.

Schumacher mentioned that future statements by ECB President Christine Lagarde at the press conference may reveal increased confidence that the bank will meet its inflation target.

However, wage growth uncertainties, oil prices, and the inflation outlook may prevent the ECB from providing clear guidance “with respect to the endpoint of the easing cycle,” he said.

Schumacher added that a data-dependent approach will likely be emphasized at the meeting.

*Writing by Emir Yildirim