MARKET OUTLOOK - ECB to Gradually Lower Rates Until Reaching 2%

David Zahn from Franklin Templeton stated that the European Central Bank will continue its gradual approach to monetary easing and will implement 25 basis point cuts at each meeting until interest rates fall below 2%. The head of fixed income, Zahn remarked, “While policy decisions will continue to be data-driven, deteriorating economic indicators, particularly the stagnant growth in Europe, support the continuation of easing.” Despite ongoing political turmoil in France and Germany, it seems unlikely that the ECB will deviate from its course. Inflation is expected to remain below the target until 2026, with inflation rates potentially approaching 1% by the end of 2025.