The European Central Bank will start cutting interest rates sooner than the Fed, Bankinter predicts

The European Central Bank (ECB) will start cutting interest rates sooner than the North American Federal Reserve, according to Bankinter forecasts.

“We expect that, taking into account the macro environment and the weakness shown by the euro area, there will be greater reasons for the ECB to start cutting interest rates before the Fed, especially if the unemployment rate remains unchanged,” Jose said. Calheiros, Director of Bankinter Gestión de Activos in Portugal.

“The European Central Bank will be more sensitive to the arguments of the German authorities. There are already many finance ministers calling for some sensitivity and common sense to start easing the restrictions to which the economies have been exposed over the past eighteen months,” he said in a meeting with reporters on Friday.

He added: “Ms. Lagarde will therefore be able to give in to the temptations or demands of the political authorities in the euro area faster than the Fed.”

“The market began several months ago to rule out sharp cuts from both the Fed and the ECB for this year, even anticipating seven rate cuts.

But in the last month and a half, it has introduced some realism, especially with the postponement of this new cycle, which advances interest rates until the end of May.” In the markets, the European Central Bank is expected to make four cuts, up to 3%, and 3.5 cuts. by the Federal Reserve to reach 4.25%.

Among the downside risks this year, the bank's analysts point out that “central banks are not living up to expectations in cutting short-term interest rates.”

In the central scenario, “global inflation remains on a downward trend, with the first interest rate cut likely to take place” in the first half of the year.

In the US and UK, there may be a soft landing for the economy, with “heavier” scenarios in Europe and China.

On the positive side, global inflation is correcting more than “expected” and “mild recessions followed by a strong recovery” may occur.