Financial expert warns against too rapid expectations of interest rate cuts by the ECB in 2024

Financial expert warns against too rapid expectations of interest rate cuts by the ECB in 2024

According to a report by www.faz.net,
The European Central Bank (ECB) is unlikely to cut key interest rates next year. According to Austrian central bank chief Robert Holzmann, there is no guarantee of interest rate cuts in 2024, even though the ECB has carried out an unprecedented series of interest rate hikes this year. This normalization step after the low interest rate era is already having an impact on the decline in inflation. Holzmann is one of the so-called “hawks” on the ECB Council who advocate a stricter monetary policy, in contrast to the “doves” who are in favor of a looser monetary policy.

Impact on the market and the financial industry

The ECB's decision not to cut interest rates for the time being could lead to a strengthening of the euro currency as higher interest rates make the currency more attractive. However, this could make exports to the euro area more expensive and tend to dampen economic growth prospects. In addition, long-term capital market interest rates could already be falling, making it more difficult to combat inflation.

Assessment by financial experts

Commerzbank chief economist Jörg Krämer warns against a hasty change by the ECB and emphasizes that giving in too quickly carries the risk that inflation will settle at a level that is too high. Ulrich Stephan, chief investment strategist at Deutsche Bank, warns of potential disappointments for the markets as expectations of looser monetary policy are exaggerated.

It remains to be seen whether the ECB will adjust interest rates in 2024 due to ongoing economic developments in the euro area or take other monetary policy measures to control inflation.