Institutions: Economic improvement and fiscal expansion may prevent the Central Bank of Europe from lowering interest rates to 2%

On March 7th, Jinshi Data, Sandra Rhouma, a European economist at Lianbo Asset Management, stated in a report that the level at which the European Central Bank will stop cutting interest rates is expected to be higher than previously expected. Rhouma said that the background for this adjustment is the reduced downside risks of the rising economy, more expansionary fiscal policy, and the assumption that the European Central Bank’s policy is close to neutral. She said, “Therefore, my revised benchmark for the European Central Bank’s interest rate policy at the end of 2025 is 2%, higher than the previous 1.75%.” “Considering medium-term risks, the possibility that the European Central Bank will lower interest rates to below 2% by the end of the year seems to have diminished.” If the European Central Bank’s forecast shows that the inflation rate will rise in the coming years, they may choose to keep the interest rate at 2% rather than raising it in 2026.