Kathimerini Greece Newsroom
Europe's top central bankers have affirmed that despite market expectations for a reduction due to weakening growth, interest rates will persist at elevated levels. Andrew Bailey, the governor of the Bank of England, cautioned against premature speculation on a rate cut, while the central bank's chief economist, Hugh Peel, suggested a possible cut in mid-2024.
Bailey stated, "It's really too early to talk about a rate cut. The market will get to that point. That's my understanding. But we're not talking about that right now." Similar warnings were issued by ECB chief economist Philip Lane, Bundesbank governor Joachim Nagel, and Irish central bank governor Gabriel McLoughlin, emphasizing the necessity for high interest rates.
Officials highlighted their desire to witness businesses reduce profit margins and governments shrink budget deficits as convincing measures for easing inflation. Nagel remarked, "The last mile before we reach the 2% target will be the hardest. In the current environment of high inflation, fiscal policy will have to be restrictive." The significant slowdown in inflation and weaker growth in Europe has led markets to factor in multiple interest rate cuts across major economies in the coming year.
Despite central bank officials consistently asserting a sustained tight policy, investors have already factored in three rate cuts by the Bank of England in 2024. In the Eurozone, markets are anticipating a 75 basis points interest rate cut by the ECB by April.
In the United States, traders foresee the Fed maintaining rates until mid-2024. However, central bank hawks like Governor Mitchell Bowman argue that if progress in disinflation halts or if current interest rates prove insufficient to bring inflation back to the 2% target, borrowing costs could rise further.