How much further will European Central Bank cut interest rates?

Doha: Spiralling inflation in the Euro Area was finally stabilized last year after an unprecedented cycle of policy rate increases by the European Cen...

Doha: Spiralling inflation in the Euro Area was finally stabilized last year after an unprecedented cycle of policy rate increases by the European Central Bank (ECB).

The most aggressive tightening sequence in the history of the ECB took the benchmark interest rate to 4%, as a response to the unprecedented post-Covid inflationary shock.

This was followed by a “holding” period of nine months, as the central bank waited for inflation to shorten the gap between the peak of almost 11% and the 2% target of monetary policy, QNB said in its economic commentary.

Interest rate cuts finally began in June last year at a cautious pace, as ECB officials gained confidence in diminishing price pressures.

This brought the deposit rate to 2%, a level broadly within the “neutral range” that implies that monetary policy is neither expansionary nor contractionary.