Oliver Mangan: Markets expect ECB to start cutting interest rates by mid-2024

Stagflation could remain the order of the day for the Eurozone into next year, with a risk that the economy could fall into recession

The Eurozone economy has stagnated over the past year.

Markets are of the view that we have seen the final European Central Bank (ECB) rate hike, following last Thursday’s 25bps increase, which brought the key deposit rate up to 4%. 

The ECB commented that the marked tightening of monetary policy since July 2022 will have a substantial impact in terms of bringing inflation back down to its 2% target in a timely manner. It warned, though, that rates will need to be maintained at current levels for a sufficiently long period of time to ensure their inflation goal is met, suggesting that monetary easing is not on the horizon anytime soon.