The market is excited about how long the European Central Bank will continue to cut interest rates

European The Central Bank (ECB) is once again in the grip. Therefore, the monetary policy decisions announced on Thursday are exceptionally interesting.

The euro area’s economy is overshadowed by the aggressive trade policy of the United States. In addition, inflation, or rising consumer prices, is still faster than the ECB’s two percent targets.

Nevertheless, the financial markets are almost certain that the Central Bank will cut 0.25 percentage points on its control interest on Thursday. The key question is how long the interest rate on the control interest is calculated under the conditions of increased uncertainty.

The impact of uncertainty, in turn, provides information on the Central Bank’s business cycle forecast to be published on the same day.

AP: n director general Christine Lagarde Has been very careful in his statements lately. Instead of a member of the board of directors Isabel Schnabel has already tuned the discussion for interruption of coronary cuts.

In recent weeks, uncertainty has been increased by the US President Donald Trump Colorful and volatile statements. He intends to prescribe 25 % import duties for European products. So far, it is still unclear which products would be targeted at all products.

Customs causes disruption to the global economy, which are likely to slow down economic growth. Negotiations on the node of the Ukrainian peace plan are also reflected in the economy.

Financial company Nordea’s main analyst Jan from Gerich It considers it possible that the central bank will slightly reduce economic growth in its new forecast.

Nordea estimates that the Central Bank will lower its control interest rate after Thursday in April by 0.25 percentage points.

“The uncertainty about the development of the euro area economy is very high, which would support the continuation of interest cuts in the summer. On the other hand, the decision announced by Germany on Tuesday will begin to support its economy more strongly that the euro area economy could grow more than expected and that interest cuts can soon be suspended. ”

However, the ECB’s business cycle forecast has been prepared before the German announcement.

“Interest rates on government bonds have risen in recent days. If they have risen too much, this would also support the continuation of interest rates longer than expected, ”says von Gerich.

Financial company SEB estimates that the ECB will continue with 0.25 percentage points of interest until the end of the summer. This would mean that the interest rate would be 1.50 % in September. Currently, the control interest rate is 2.75 %.

“Because of the great uncertainty, it would be consistent that the ECB would not give any new clues on Thursday. That is, it would repeat again that monetary decisions are made at the meeting on the basis of the new available information, without committing to any interest rate, ”says SEB’s main strategist Jussi Hiljanen.

In his view, it is possible that the Central Bank will weaken its forecast on Thursday’s euro area economic growth, but estimates the total inflation to be faster than previously predicted.

“If the economic growth of the euro area turns out to be weaker than predicted, it would support the continuation of interest cuts in the summer. Especially if inflation will slowly slow down in the coming months, ”says Hiljanen.