Four equal rate cuts until they reach the 2%from 3% that it is today, foresees the central scenario based on which the ECB plans its next moves in 2025.

OR first reduction by 0.25 of the unit will take place at its meeting January and the other three gradually at the next meetings of the European Central Bank which sees inflation decelerating faster than its forecasts, but the European economy slowing.

These are the two critical factors that have, so far, been driving the basic planning drawn up by the ECB for the coming months, according to European sources with knowledge of the discussions and processes taking place in Frankfurt regarding the formulation of monetary policy.

According to the data available to the ECB, inflation is decelerating at a rate of 0.2%, faster than initial forecasts. This means that the 2% inflation target is expected to be reached faster than initial estimates. Thus the “green light” is given for the next moves on the monetary policy front that will give breathing room for the European economy and borrowers.

The European economy is slowing down

However, on the front of the European economy, the developments are not encouraging. Indicators of economic activity in the eurozone portend a slowdown. The biggest problem is focused on Germany, where growth rates remain weak at levels just above zero, while France is also faced with low growth rates and its ever-increasing public debt. In the light of these data, it is estimated that the reduction of interest rates and cheaper borrowing money will be an antidote to the recessionary threat and a catalyst for positive developments on these two fronts that affect the entire eurozone.

The basic scenario for the ECB’s next moves does not include any negative developments in case the pre-announcements of the US president-elect D. Trump to impose tariffs on European products. In this case, as reported by European actors, the ECB is expected to act more decisively to prevent risks.

That is why Frankfurt, like the governments of the eurozone member countries, are waiting until the first announcements of the new US president on January 20. In any case, as the same actors assure, the ECB will take action with all the weapons it has in its quiver to prevent risks. A similar action was taken by the ECB both in the debt crisis of the last decade and in the Corona period, providing cheap money to strengthen liquidity in the market and the European economy.