ECB Could Look at Rate Cut Question in 2024
The European Central Bank (ECB) could consider the possibility of a rate cut in 2024, according to ECB Governing Council member and Bank of France Governor Francois Villeroy de Galhau.
Villeroy’s Comments
Villeroy made the comments in an interview with Bloomberg Television on December 1, 2023. He said that the ECB will look at the rate cut question in 2024, depending on the economic situation.
Villeroy also said that the ECB will continue to use its existing tools to support the economy, such as quantitative easing and targeted longer-term refinancing operations. He added that the ECB will also look at other measures, such as a rate cut, if necessary.
ECB’s Monetary Policy
The ECB has been using its monetary policy to support the economy since the start of the coronavirus pandemic. The ECB has cut its deposit rate to -0.5%, and has launched a €1.35 trillion pandemic emergency purchase program.
The ECB has also launched a series of targeted longer-term refinancing operations (TLTROs) to provide banks with cheap funding. The ECB has also extended its asset purchase program until at least the end of 2023.
Economic Outlook
The economic outlook for the Eurozone is uncertain. The Eurozone economy is expected to contract by 8.3% in 2020, according to the European Commission. The Commission also expects the Eurozone economy to grow by 4.2% in 2021 and 3.7% in 2022.
The ECB is expected to keep its monetary policy accommodative for the foreseeable future. The ECB is likely to keep its deposit rate at -0.5% and continue its asset purchase program until at least the end of 2023.
Inflation Outlook
The ECB is also likely to keep its inflation target of below, but close to, 2%. The ECB’s inflation target is based on the Harmonised Index of Consumer Prices (HICP). The HICP is expected to remain below 2% in 2021 and 2022.
Conclusion
The ECB could consider the possibility of a rate cut in 2024, depending on the economic situation. The ECB is likely to keep its monetary policy accommodative for the foreseeable future, with its deposit rate at -0.5% and its asset purchase program continuing until at least the end of 2023. The ECB is also likely to keep its inflation target of below, but close to, 2%.