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Economists expect smaller interest rate cuts from the European Central Bank than recently

Economists expect smaller interest rate cuts from the European Central Bank than recently

According to economists, the ECB will likely cut interest rates again for the first time in June and will follow this with two more steps down by the end of the year. These are fewer steps than economists expected in March, according to a Reuters survey published on Monday. 97 economists participated in the survey from April 15 to 22.

Of these, 91 expect the ECB to cut its deposit rate by 0.25 percentage points to 3.75 percent in June. Six economists do not expect a first downward step until the third quarter. The next ECB interest rate meeting is scheduled to be held in Frankfurt on June 6.

The “neutral” interest rate is 2.25 percent

Financial institutions receive the deposit rate when they deposit excess funds with the central bank. It is currently at a record level of 4.00 percent. A slim majority of 54% of 52 out of 97 economists expect the ECB to then cut them twice more. 38 out of 97 experts expect interest rate cuts of a total of one percentage point or more. In a March poll, 39 out of 77 economists expected this.

When asked about the eurozone's neutral interest rate level, the value was in the middle of all 35 answers – the median – 2.25 percent. A neutral interest rate is an interest rate that does not push up or slow down the economy. The answers were consistent with recent comments made by French Central Bank President François Villeroy de Galhau. This assumes that the neutral interest rate in the G20 community ranges from 2.0 to 2.25 percent.

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