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The European Central Bank (ECB) governing council member Klaas Knot said on Tuesday that the central bank is likely to continue to cut interest rates at least through the first half of 2025, to a level between 2% and 3%, per Reuters.   Key quotes “I would expect us to continue to gradually reduce interest rates in the coming time, also in the first half of 2025.“ “I don’t expect rates to return to the extremely low levels we saw before the pandemic. They will likely end up on a somewhat more natural level. I don’t know where exactly, but somewhere starting with a 2.”   Market reaction  At the time of press, the EUR/USD pair was up 0.07% on the day at 1.1188.  ECB FAQs The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde. In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The…

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Filed under: News - @ September 25, 2024 12:21 am