From Morningstar: 2024-04-11 11:02:00

The European Central Bank (ECB) decided to keep its key interest rate at 4.50%, along with other rates unchanged, in its recent meeting. Stock markets in Europe remained mostly flat after the announcement by ECB. ECB President, Christine Lagarde, hinted at a possible rate cut in the future based on encouraging inflation data from April.

The ECB did not directly mention when rates might be cut, stating that it will assess new data showing inflation returning to its 2% target. Market strategist Michael Field believes the ECB may proceed with cutting rates in June. Economic growth is weak in Europe, and inflation has fallen to 2.4% in March.

According to ING Global Head of Macro, Carsten Brzeski, a rate cut is anticipated at the next meeting, while ECB President Lagarde stated that most underlying inflation measures are reducing. In the US, expectations for Federal Reserve rate cuts have fallen after higher-than-expected inflation. The market reaction to any policy divergence between ECB and Fed may impact capital flows and inflation.

Equity markets usually rise ahead of anticipated rate cuts, while bond markets might experience downward pressure. Falling interest rates tend to boost bond prices, benefiting existing bond holders. Savings rates on bank accounts are expected to decrease, affecting savers negatively but potentially lowering borrowing costs for consumers. It is anticipated that business loan rates will decline while mortgage rates may increase.



Read more at Morningstar: ECB Holds Interest Rates Steady, Signals First Cut…