Economists lower ECB rate cut expectations

Economists have begun to scale back their expectations for how much the European Central Bank will cut interest rates. Economists have begun to scale back their expectations for how much the European Central Bank will cut interest rates after it began cutting interest rates next week. Economists surveyed by Bloomberg say the first deposit rate cut, currently at 4%, will be expected next week, but they have revised down their expectations for a total of interest rate cuts from seven quarter-point cuts to six. The surprise recovery in the eurozone economy and continued wage pressures are contributing to the expectations for fewer rate cuts. “It will be hard to argue why this is the right time to cut rates when there is no verbal guidance for further rate cuts,” said Hugo Le Damany, economist at AXA Investment Managers, who expects the ECB deposit rate to fall to 2.75% a year from just five quarter-point cuts. Economists surveyed by Bloomberg say the biggest risk to the eurozone economy is inflation. Inflation is followed by the US elections and geopolitical tensions.