By Vangelis Dourakis

In “orbit” and new interest rates, the European Central Bank. Another ‘scissors’ of Europitian At the meeting next Thursday, it will make the cost of borrowing in Europe even cheaper and of course Greece. If the new reduction in Euro -houses is decided, the eighth will be the eighth after June 2024 – and the seventh consecutive – with the ECB’s deposit rate shrinking to 2%.

The ECB, which is meeting on Thursday (June 5), is likely to decide to further relax its monetary policy. If this decision is adopted, then the interest rate on the acceptance of deposits will be reduced, for eighth time, by 25 basis points and will “land” to 2% from 4% last year in June.

What will the new reduction for households and businesses mean

For those who have a floating rate loans, such a development will mean a new relief of their monthly tranche as it will stand down and Euribor.

“I think we will reduce interest rates once again in June and then I see a pause,” said Bank of Greece Governor Giannis Stournarasin an interview given to ‘Everyday“, Giving the” mark “of the intentions of the majority of the members of the Board of Directors for the next meeting of the ECB.

At the same wavelength were statements by France’s central bankers, François Vilua de Galloof Finland, Olli Renn and Lithuania, Gardimina Simos.

Billewash said that there has not yet been normalization of the ECB’s monetary policy and this may appear at the upcoming meeting. Oli Renn noted that if the newer elements and new quarterly forecasts of the Central Bank, which will be presented on Thursday, confirm that inflation (running at a rate of 2.2% in April) was moving at low levels and that the growth of the economy was subdued, ” interest rate. “

Simus believes that inflation will move below the target of 2% of the central bank, due to the euro’s reconstruction, stressing that for this reason it sees a significant chance of reducing interest rates. In fact, he said he was expecting another reduction this year, which could be done in July or later.

Who want to ‘brake’ the reductions and why

However, there are also the “hawks” that have opposed the reduction of interest rates: two members of the Board of Directors expressed this view. of the ECB, Austrian Robert Holzmannwho is considered a “hawk” because of his position for hard monetary policy, and the German, Isabelle Snabel.

Holzmann said that “there is no reason to reduce interest rates in June and July”, adding that a further reduction would probably have no effect on growth, which is due to uncertainty rather than restrictive monetary policy.

Snabel noted that the ECB should keep interest rates steadily, because the upheaval in the global economy can lead to new price increases and thus inflation in the medium term.

It should be noted that the two “hawks” had opposed the reduction of interest rates and at the April meeting, but their position was obviously minority.

Who see interest rates ‘land’ at 1.5%

It is also clear that most ECB officials do not share fears of inflation, on the contrary, they believe it will fall to 2% this year and that it can then be reduced and much lower than that level.

This majority position has recently been formulated by their statements by both the ECB President, Christine Lagardeas well as its chief economist, Philip Lain who is also responsible for proposing the policies of the Central Bank.

Lane said he was sure that inflation would be reduced, referring, inter alia, to the decline in wage increases, while stressing that if inflation is continued, interest rates would continue.

Interestingly, it is implied that interest rates can decline up to 1.5%, saying that in order to reduce below this level there should be very negative developments on the front of growth, which is not shown today on the horizon.

There are three key factors that create belief in ECB officials, but also analysts and investors that inflation in the eurozone will continue to decline. All three of these reasons are related to the US president’s tariff policy:

First, the appreciation of the euro against the dollar has reduced the cost of imports and especially raw materials priced in the US currency.

Secondly, the significant reduction in oil prices due to the slowdown of the world economy by the trade war.

Thirdly, the decline in demand due to growth slowdown.

Analysts believe that growth will slow down in the eurozone, as well as around the world and especially in the US, even if President Trump has recalled the duties he has imposed.

And so they think the ECB will reduce interest rates in June and further to 1.75% this year, with Morgan Stanley seeing the “bottom” at 1.5%