Economists expect 0.9 per cent expansion in the euro area this year, down from 1 per cent in the previous poll
EURO-ZONE forecasters are increasingly predicting that the European Central Bank (ECB) will resume interest-rate cutting after a pause with a reduction below 2 per cent in 2026.
Frankfurt officials are still widely expected to lower their deposit rate by 25 basis points at each of the next three meetings from the current level of 2.75 per cent, according to Bloomberg’s monthly survey of economists. But a slim majority now predicts policymakers will make a further reduction in March 2026.
While confidence among policymakers about reaching the 2 per cent inflation target has increased, President Donald Trump’s threats of US tariffs are weighing on the outlook.
Companies and households also face a lack of political direction in France and Germany, whose lacklustre economies have been holding back the wider region.
The ECB “can cut rates steadily without risking a flare-up in inflation”, said James Rossiter, head of global macro strategy at TD Securities. “The impact of Trump’s trade wars will be more significantly felt in the EU than, say, the UK, meaning that the ECB will need to bring its policy rates below neutral.”
Officials are debating how much further to cut rates after five such moves since last June. A key question is whether they can stop at the so-called neutral level that neither restricts nor stimulates economic growth, though several policymakers have warned against using the concept to guide real-time policy decisions.
Economists in the survey again dialled back their growth outlook for the region. They expect 0.9 per cent expansion in the euro area this year, down from 1 per cent in the previous poll.
The change reflects lower predictions for Germany, France and Italy. Spain, by contrast, is seen growing more quickly than before. BLOOMBERG
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