According to surveyed economists, the European Central Bank may lower its benchmark interest rate once every quarter before the end of next year. If this timeline is followed, it means that the easy cycle of the European Central Bank will end earlier than previously expected.

According to a survey of forecasters in the media, the European Central Bank will cut interest rates by 25 basis points for six consecutive times (a total of 150 basis points) by the end of December 2025, and will adjust the deposit rate to 2.25%. Previously, the interviewees predicted that this level would not be achieved until the second quarter of 2026.

As of now, the main refinancing rate, marginal lending facility rate and deposit facility rate in the euro area will be maintained at 4.25%, 4.5% and 3.75%, respectively.

There is still uncertainty in the future.

Starting from June this year, the European Central Bank has lowered borrowing costs for the first time in five years, lowering the three key interest rates in the eurozone by 25 basis points each, because people have more confidence that inflation will fall back to the target of 2% at the right time. At the policy meeting in July, the European Central Bank decided to keep the three key interest rates in the eurozone unchanged.

Next, the European Central Bank will inevitably have more interest rate cuts, but policymakers have not promised a specific timetable because of the uncertain economic background, and said that they will rely more on data.

So far, stubborn wage pressure seems to have boosted inflation. In July, the eurozone's CPI unexpectedly rose slightly, with an initial annual rate of 2.6%, exceeding the 2.5% increase in June, and the market expected 2.5%.

This undoubtedly increases the complexity of the situation that the European Central Bank faces in formulating monetary policy. At the last meeting of the European Central Bank's board of supervisors, some officials doubted whether there could only be one more interest rate cut this year.

However, as the economic outlook deteriorates, those who advocate accelerating interest rate cuts seem to receive support from data.

Data from last month showed that the growth of the private sector in the eurozone stagnated in July, with Germany, the largest economy in Europe, still dragging down other countries in the region. The S&P Global Composite Purchasing Managers' Index for the eurozone fell to 50.1 in July. Although this number is higher than the economic growth threshold of 50, it is the worst data since February. This data can be attributed to Germany, which unexpectedly contracted that month and fell below the boom-bust dividing line for the first time since March.

In addition, in the three months ending June, the GDP of the eurozone increased by 0.3% compared to the previous quarter, which was the same as the previous value. However, preliminary data released by the German statistical department showed that Germany's GDP shrank by 0.1% in the second quarter, reflecting the uneven pace of growth in the eurozone and highlighting the challenges faced by European Central Bank decision-makers. They need to make a judgment in September on whether the eurozone economy is fragile enough to require further interest rate cuts.

At present, surveyed economists generally lowered their expectations for Germany and predicted that its economic growth rate will be only 0.1% this year.

Editor/ping