The European Central Bank in July will send a signal about its readiness to reduce interest rates, and in September will reduce them again to try to shake up the Eurozone economy.
The need for additional support has become urgent, when the ECB President Mario Draghi said that would require new incentives, if the predictions do not improve.
He said that the prolonged uncertainty, largely due to trade tensions, means that downside risks to growth and inflation materialise.
The majority of Bloomberg economists expect that at the meeting on 25 July, the governing Council will change the wording to show that the rates can be lowered. The current version of the wording implies that rates will remain at “current levels, at least until the end of the first half of 2020.”
Respondents expect the Deposit rate, already at a record low, will be reduced by 10 basis points to minus 0.5 percent in September. HSBC predicts a downturn by the same amount in December, and ABN Amro waiting for such a move early next year.
Money markets mortgage rates decrease borrowing costs by 10 basis points in September.
The Central Bank had previously hoped to begin slowly to return to the rate hike somewhere next year, but now it is waiting for a prolonged period of softer monetary policy, since it is necessary to resist the protectionism pursued by the U.S., which is detrimental to the world economy.
It is expected that the Federal reserve will also lower rates in this year, and Australia, Russia, India, Chile and other countries have already started to ease monetary policy.
Economists are largely split on the issue of the resumption of the ECB’s large-scale asset purchases in the near future such a scenario is not waiting for the most.
The Central Bank ended the quantitative easing program until the end of last year, buying bonds at 2.6 trillion euros in 2015.