MFS IM: “ECB could start cutting cycle before Fed”

Financial markets are awaiting the decisions taken by central banks this week. Analysts expect so The European Central Bank (ECB) and the US Federal Reserve (Fed) maintain a pause due to moderating inflation. Therefore, it does not raise or lower interest rates.

The big question now is when the first interest rate cuts might take place. “We expect the ECB to keep interest rates stable until at least the second quarter of 2024“Maybe until June,” he confirmed. annalisa square, Fixed income analyst MFS Investment Management.

Despite these expectations, Piazza does not rule out that the European Central Bank will be forced to cut interest rates before that date. “There is a possibility of an early cut in March or April If inflation and economic growth cannot counter deflationary trends by early 2024. What’s more, The ECB could start its cutting cycle before the Fed. “A weak euro and dollar could exacerbate imported inflation, but if the ECB cuts interest rates due to a slowing economy, lower demand could offset the impact of a weaker currency,” he said.

Markets expect significant interest rate cuts in 2024. “The market expects cuts of about 130 basis points in 2024, which seems aggressive at first glance.”. Although official interest rates are expected to reach about 2.75% by the end of next year,… Monetary policy will remain in the restricted areaHe pointed out that this leaves the economy vulnerable to the risks of declining inflation, unless economic growth witnesses a significant recovery.

However, analysts expect a slowdown in economic growth on the Old Continent. “The latest surveys and concrete data do not predict a promising future for the Economic and Monetary Union (EMU) economy. Therefore, Expectations are growing that the more dovish wing of the ECB’s Governing Council will push for interest rate cuts sooner rather than later.“, defend.

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