SPEU - Cautious Monetary Easing In The Eurozone Has Started

2024-06-07 11:05:00 ET

Summary

• The eurozone economy continues to recover, but there are no reasons to expect a significant acceleration in growth.
• With some pockets of inflationary pressures still hanging around, the ECB’s rate-cutting cycle will unfold very slowly.
• We see 2.4% headline inflation this year and 2.1% next year, but we have to admit that the risk is clearly skewed upwards.

By Peter Vanden Houte

Policy normalisation has started

As widely expected, the European Central Bank cut its leading interest rates by 25bp, removing the ' top level of restriction ', as ECB Chief Economist Philip Lane put it in an FT interview. This is the first time the ECB has cut rates since 2019. However, the Bank also acknowledges that monetary policy will have to remain restrictive this year and that a back-to-back rate cut in July is very unlikely....

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