The European Central Bank (ECB) is preparing to cut interest rates again next week, aiming to support an economy facing numerous challenges. For four years, the ECB has been working to slow the economy by raising its key deposit rate to a record 4 percent to control inflation. Since June, it has gradually reduced rates, with next week’s expected cut being the sixth in the current cycle, bringing the deposit rate down to 2.5 percent. ECB President Christine Lagarde will face pressure to clarify future rate directions amid unpredictable actions from U.S. President Donald Trump. Without Trump’s influence, Lagarde’s task might be simpler as growth remains weak and inflation appears to be falling back toward 2 percent. Senior members of the Governing Council predict further cuts, potentially lowering the deposit rate to 2 percent. However, rising unemployment is affecting consumer confidence, complicating the ECB’s efforts to boost spending. Some Governing Council members advocate for removing any ‘restrictiveness’ from the ECB’s stance, while others, like Head of Markets Isabel Schnabel, caution against further cuts due to global economic changes. The debate over ‘neutral’ policy may soon shift to discussions on necessary stimulus measures. — news from POLITICO Europe
