At the end of October, the European Central Bank (ECB) suspended the rate hike after 10 consecutive increases, which started in July 2022. The economist Osama Rizvi explains to Euronews Business what are the prospects for interest rates.
The next ECB meeting will take place on 14 December 2023, and analysts predict that the European Central Bank will lower interest rates, but last time it kept them at 4 %.
Rising interest rates have a negative impact on consumers, as mortgages and interest on other loans become very expensive. In addition, the increase in costs for businesses (now that interest rates are high) affects consumers, who pay more for consumer goods.
An increase that feeds the expensive life, which in one way or another is affecting most European citizens. When rates fall, however, the opposite occurs and the economy expands overall.
It therefore appears that the ECB will become the first central bank to cut interest rates, as indicated by the Governor of the French Central Bank. François Villeroy de Galhau said that, barring major surprises, the rate hike cycle should now be over, as progress in disinflation was “faster than expected”.
Government bond yields started to fall, and investors are now betting on a 75% probability rate cut, up from 40% last week. Goldman Sachs now sets the estimated date for a rate cut by the ECB in the second quarter of 2024.
Other experts say it is too early to celebrate, and that the fight against inflation is not over yet. Innes McFee, chief economist at Oxford Economics, said the ECB could make a policy error by cutting rates too early.