Mid-year interest rate cut expected 'despite blow to spring hopes'

US economy is predicted to be on course for a soft landing, and eurozone and UK inflation is expected to fall further

Neil Shearing of Capital Economics suggests elements such as souring commercial property loans on some banks' books are complicating discussions about possible interest rate cuts. 

Financial markets have not given up completely on their bets that the European Central Bank will vote for an early cut in interest rates before the summer, but a mid-year rate cut is still on the cards, an economics consultancy has predicted.

Capital Economics group chief economist Neil Shearing said in a commentary that discussions on the timing of interest rate cuts on both sides of the Atlantic have been complicated by “the noise” surrounding the effects of inflation staying elevated for longer, souring commercial property loans on the books of some banks, and the wider performance of economies.