The European Central Bank (ECB) is expected to maintain its current interest rates at Thursday's meeting. Much like the Federal Reserve, investors are curious about the timing of potential rate cuts.
While the eurozone, comprising 20 nations, currently boasts historically low unemployment rates, the growth forecast remains bleak. Additionally, with inflation slowing down rapidly, the ECB will likely face pressure to reduce borrowing costs.
According to ECB President Christine Lagarde, although interest rates may have reached their peak, she does not anticipate any considerations for lowering borrowing costs until summer. Lagarde believes it is crucial to ensure that inflation remains low and wage hikes are kept under control in the coming months.
Carsten Brzeski, an ING strategist, expects that the outcome of the meeting will likely emphasize the dependency on data and provide some insight into potential conditions for a rate cut without making any firm commitments.
Notably, this ECB decision comes a week before the Federal Reserve's next meeting, where it is also anticipated that they will maintain their current policies. Market expectations for the first rate cut by the Fed have shifted from March to May, as reported by the CME FedWatch tool.
The ECB does not foresee inflation reaching its 2% target until 2025. In December, the inflation rate rose to 2.9% from the previous month's 2.4%, yet it has significantly declined since its peak of over 10% in October 2022.
Simultaneously, economic growth prospects remain feeble. The ECB projects a meager 0.8% expansion in 2024, following a modest 0.6% growth in 2023.
After the decision is announced, Lagarde will hold a press conference. However, the central bank will not update its projections during this meeting.