European Central Bank Governing Council Member Luis de Guindos: The possibility of an interest rate cut next week is very high
European Central Bank Governing Council member Isabel Schnabel stated that recent data indicates a cooling of inflation, and there is a high likelihood of a 25 basis point rate cut at next week's interest rate meeting. The market generally expects the European Central Bank to continue cutting rates, with analysts predicting that the rate cuts in the coming months will be larger than those of the Federal Reserve and the Bank of England. European Central Bank policymakers broadly support dovish rate cut expectations, which could bring the deposit rate down to 2% by summer
According to the Zhitong Finance APP, José Luis Escrivá, a member of the European Central Bank's Governing Council, stated on Wednesday that given recent data confirming the outlook for cooling inflation, there is a very high likelihood that the European Central Bank will announce another reduction in borrowing costs at next week's interest rate meeting.
"The market expects the European Central Bank to further cut rates by 25 basis points," the ECB board member and Governor of the Bank of Spain said in an interview in Davos on Wednesday. "It feels like this is the most likely scenario," he added, calling such an outcome "very positive."
Traders generally expect that ECB officials will continue their rate-cutting cycle during the meeting in Frankfurt on January 29-30, following four rate cuts already made in 2024, and not following the "hawkish rate-cutting pace" of the Federal Reserve as some analysts had previously predicted. Given that inflation is expected to reach 2% later this year, analysts predict that the ECB will implement larger-scale rate cuts in the coming months compared to the Federal Reserve and the Bank of England.
Recent comments from ECB policymakers have generally supported this dovish rate-cut expectation. Earlier on Wednesday, ECB President Christine Lagarde told CNBC that gradual rate cuts may continue, while Klaas Knot, the traditionally hawkish President of the Dutch Central Bank, did not dispute the market's expectations for the ECB to take rate-cutting actions in its next two meetings, but he declined to speculate on this further.
On Tuesday, Joachim Nagel, President of the German Central Bank, stated that the so-called "neutral interest rate level," which neither restricts nor constrains economic activity in Europe, should be reached by mid-year.
François Villeroy de Galhau, a member of the ECB Governing Council and Governor of the Bank of France, stated on Tuesday that it is very likely that the ECB will announce rate cuts at each interest rate meeting this year. He also mentioned that this could bring deposit rates down from the current 3% to 2% by summer. "The consensus we have reached is that we will continue to take action at each meeting, and we have successfully practiced this approach since September."
A significant uncertainty lies in President Donald Trump's threat to disrupt global trade by imposing tariffs on goods entering the United States. However, due to the unclear specifics of his planned tariffs, it is difficult to predict the extent of the impact of Trump's trade policy on the European economy