7 July | Euro

ECB may delay interest rate cuts until September — Capital Economics

ECB may delay interest rate cuts until September — Capital Economics

Analysts at Capital Economics say the European Central Bank (ECB) is likely to cut interest rates only in September due to concerns over global trade and the recent rise in the euro. 

ECB officials believe trade uncertainty could hurt investment and exports in the short term. However, increased government spending is expected to support eurozone GDP growth in the medium term. 

The most likely outcomes of US-EU talks include their extension or a preliminary deal, according to analysts at Capital Economics. 

Meanwhile, central bank officials are concerned about the sharp jump in the euro against the dollar. The bloc's currency has risen by almost 14%, driven by increased investor interest in European assets in the first half of this year, the Financial Times reports.

Too much strengthening in the euro could push inflation below the ECB’s target and make imports cheaper. In addition, a stronger currency could make EU goods more expensive abroad, without having an impact on the region’s overall economic activity.

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