Next Rate Change to Consider Inflation, Growth, Exchange Rate
The rating agency does not expect any further ECB rate cuts this year, but the ECB will keep its options open. The bias late this year or next year is towards easing rather than tightening. The next change of the deposit rate from its current 2% will hinge on inflation dynamics, US-EU trade relations, the economy’s growth trajectory and the exchange rate. The euro has strengthened 13% against the dollar this year.
Any move significantly above 1.20 against the dollar could provoke concerns around deflation risks and competitiveness. As the main alternative reserve currency to the dollar, the euro has benefit