The European Central Bank should proceed with only one cut of additional rates this yearto then maintain the stable reference rate to 2%. These are the “Recommendations” formulated by Monetary background For the Institute of Frankfurt, on the observation that monetary policy has worked so far and reported the inflation in line with the target, while risks and uncertainties remain on the growth. A conviction also shared by the president of the ECB Christine Lagarde, in the light of the duties, which he believes will have a disappointment effect for the EU, undermining growth rather than feeding prices.
FMI recommends a single additional cut of 25 points
“We have a very clear recommendation for the ECB: so far we have seen a huge Success in disinflation efforts And monetary policy worked, “said Alfred Kammer, director of the European FMI department in an interview with the CNBC, on the sidelines of the spring meetings of the Monetary Fund and the World Bank in Washington.
“We expect that reaches the goal in a sustainable way Inflation of 2% in the second half of 2025 “, added the monetary fund official, hoping that” there is room for a further cut of 25 basis points, in summer, and then the ECB should maintain the reference rate to 2%unless significant shocks occur and it is necessary to recalibrate monetary policy “.
Cuts reported inflation in line with target
The ECB cut the rates seven times from June 2024, with differences of 25 vault. The last cut dates back to last week, when the ECB brought the rate on deposits at 2.25%. This made it possible to report The inflation of the euro area in line with the targetreaching a 2.2% level in March.
Now, the monetary fund has “Significantly” revised the growth prospects for the decline Of many economies developed, including the Eurozone, believing that duties and commercial tensions have weighed on economic perspectives, neutralizing the positive impact of the increase in public spending for defense and the infrastructures of leading economies such as Germany.
Duties: Lagarde sees disinflation effect
Also the president of the ECB Christine Lagarde It is convinced that the impact on growth will be stronger than the prices, therefore duties they will have a total of a disinflation effect. “It is not very clear what the net impact will be,” said Lagarde, speaking of the duties. “Especially if there are no countermeasures from Europe, I think clear inflation is uncertain at the moment, but it will probably be more uninflation of inflationary.”
Lagarde reiterated that The impact of duties is “difficult to evaluate Because we live in a world of hypothesis “and” we don’t know exactly what will come out of the ongoing discussions “, therefore “be cautious” must be. The war of the duties between China and the USA instead could affect the EU with a deflationary effect in the event that the greater offer of Chinese goods pour into the continent.
