Madrid, June 2 (Ifecom).- Persistent inflation and the solidity of the European and American economies have clouded the expectations of analysts, who only assume that the European Central Bank will start cutting interest rates next Thursday.
Analysts have doubts about the next steps the European Central Bank will take, and are cautious when predicting the path the US Federal Reserve’s monetary policy will take.
Regarding the upcoming meeting of the ECB Governing Council, “everything has already been said,” emphasizes Ulrike Kastens, European economist at the German management company DWS.
“On June 6, it should be officially confirmed that the ECB will cut the official interest rate by 25 basis points,” he adds.
This will be the first cut since March 2016. At that time, the interest rate was left at zero; Now it is at 4.5%.
However, Kastens points out that “what matters most is the way forward” from that point on.
“The market is already anticipating that the ECB will cut interest rates next week, although what comes next will be more difficult for the bank to communicate and assess the markets,” says Orla Garvey, of the Federal Reserve Bank of Hermes, in the same vein.
According to Kastins, “some central bankers are considering more rapid interest rate cuts and may already be in favor of another cut in July, while others prefer a more cautious approach.”
The DWS economist bets on the wisest option, taking into account rising salaries in Europe and the stability of the labor market.
“In the face of this uncertainty about the evolution of inflation, a ‘hawkish’ tone (in favor of restrictive monetary policy) is likely to prevail,” he ventures.
However, DWS maintains its forecast for three additional interest rate cuts until the end of March 2025.
According to Orla Garvey, “significant progress” has been made in controlling inflation, but “the future path is likely to be more turbulent.”
Rubén Segura Cayuela, chief economist at Bank of America for Europe, is betting on a 200 basis point cut in interest rates between June of this year and July 2025.
He adds: “We are still waiting for the first cut of 25 basis points in June. We have plans for cuts of 75 basis points in 2024 and 125 basis points in 2025.”
In his opinion, it is more likely that the next cut – after the cut in June – will occur in September, rather than in July.
Regarding the monetary policy of the US Federal Reserve, which is scheduled to hold its next meeting in the second week of June, doubts remain.
For Brett Kenwell, an analyst at investment platform eToro, Friday’s inflation data “gives investors confidence that the Fed will be able to start cutting interest rates.”
However, he explains that the Fed “would need more than a month of controlled inflation to make this move.”
He explains that the Fed “will need to see a sustained trend toward lower inflation to feel confident enough to cut interest rates.”
“At the beginning of this year, many investors were convinced that the Fed would cut interest rates four times by the end of 2024. At the time, it seemed like wishful thinking; today, considering that inflation has exceeded expectations, it seems… “More optimistic.” “Unlikely,” says Darrell Spence, an economist at Capital Group.
In his opinion, “there is a good chance that interest rates will not be reduced this year.”
Last Tuesday, Minneapolis Fed President Neel Kashkari did not rule out raising interest rates in the US, a possibility that was put on the table at the Federal Open Market Committee’s recent meeting, according to meeting minutes. Aficom
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