International Monetary Fund (IMF) experts are forecasting a “small recovery” in eurozone economic growth this year, which will be strengthened in 2025, suggesting the European Central Bank (ECB) will cut interest rates permanently, reaching 2.5% after next summer. Recall that earlier this month the ECB cut interest rates by 0.25 percentage points.
“The projected deflation path and associated risk balances, based on current information, allow for a gradual reduction in interest rates until they reach a neutral target corresponding to a terminal interest rate of approximately 2.5% by the end of the third quarter of 2020.” 2025,” the institute suggests in a document on the eurozone published this Thursday.
The ECB has set an inflation target of 2% and has expressed caution in advocating deeper interest rate cuts.
The IMF’s view, released in Luxembourg on the sidelines of a meeting of eurozone finance ministers, is that “following the pandemic, the gas cutoff in Russia and the consequences of the war in Ukraine, the eurozone economy is gradually recovering and inflation is declining.” is approaching the 2% target set by the ECB.
Meanwhile, the Euribor rate fell this Thursday to three, six and 12 months compared to Wednesday, the two fastest terms respectively to new lows since July 21 and May 19, 2023. The fall in Euribor presages a fall, albeit contained, in the ECB’s benchmark interest rates.