Will European banks continue to cut interest rates in April?
The decision of the European Central Bank to remove or retain the term 'restrictive' from its policy stance will indicate whether it will continue or suspend interest rate cuts.
The European Central Bank will cut interest rates by 25 basis points and lower deposit rates to 2.5% at its meeting on March 6th. All 82 economists surveyed expect a rate cut.
Then the focus shifted to the next step. The market expects a 60% chance of another interest rate cut in April, but hawkish policymakers such as Isabel Schnabel are fighting back.
ING has stated that a key signal will be whether the European Central Bank will remove the term 'restrictive' from its stance. If that's the case, interest rate cuts may stop next, otherwise they may be further reduced.
However, overall, the European Central Bank is unlikely to provide detailed forward guidance. Factors such as US tariffs and the situation in Ukraine may have a significant impact on the eurozone economy, making it difficult to develop a long-term policy path.
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