Days of destiny-making for the global economy and finance
Important days for the financial economy of different countries are approaching, and expectations for changes in bank interest rates in Europe and the US are coming to an end. Investors and economists have long been waiting for the announcement of new policies by key central banks around the world regarding interest rate changes. This expectation will be met with a press conference on Thursday by officials of the European Central Bank, where a new interest rate cut in the Eurozone will be announced and finalized, reducing the interest rate by 0.25% to 0.35%. Financial institutions and prominent banks have presented various interpretations of the central bank’s decisions until the end of 2024. Some believe that two or even three more cuts are on the way, while others, referring to the previous trend of decisions by the powerful head of this bank, Christine Lagarde, predict only one more cut. Recent step-by-step increases in interest rates have made money more expensive to combat inflation and slowed down the borrowing trend. With all this, shareholders and investors have already incorporated these interest rate cuts into their investment process and capital structure. Inflation in Europe has approached 2%, and now, to strengthen economic growth, money must become cheaper. With Lagarde’s official announcement, the European Central Bank has reduced its forecast for the Eurozone’s economic growth from 0.9% to 0.8%. This is happening while Biden has recorded a strong economic growth of 3% and an unemployment rate of around 4%.
The positive effects of the reduction in interest rates on capital allocation in the United States have already been embraced by investors. The promise of interest rate cuts and the prospect of stability and strength in the US economy, as announced by Jerome Powell, have directed all attention to the upcoming Federal Reserve meeting. Inflation in the US has reached 2.5% and the robust economic growth of this country, which is the envy of other nations, has reassured the Federal Reserve of the economic conditions in America, with only the formal announcement of an interest rate cut remaining.
Despite previous actions, everyone is eagerly awaiting the impact of the news of an interest rate cut on the US stock markets. What is reflected today in the European Central Bank meeting and Christine Lagarde’s briefing in the markets is also of great importance to Americans. Lagarde has always emphasized evidence-based and data-driven policy-making, and decisions regarding interest rates and inflation will be made based on facts and statistics, as will be discussed in the central bank meeting.
