THE EUROPEAN CENTRAL Bank is expected to cut mortgage rates again this afternoon.

It would be the ECB’s third straight reduction as it increasingly focuses on spurring lending to boost consumer spending and business investment in the 20 countries that use the euro.

The Frankfurt-based bank had been hiking rates since mid-2022 to combat rising energy and food costs, with policymakers turning their attention to cuts as inflation eases and the eurozone economy weakens.

But inflation pressures remain a concern, and analysts now expect the ECB to continue at the same pace as before with a quarter-point cut.

Governments and policymakers are also bracing for Donald Trump’s return to the White House next month.

He has threatened to slap hefty new tariffs on all imports to the United States, and has previously singled out the EU as the bloc runs a sizeable trade surplus with the world’s biggest economy.

Adding to the troubled picture is political turmoil in two of the largest players in the eurozone, Germany and France.

Germany is getting ready for elections in the new year after Olaf Scholz’s government collapsed last month, while French prime minister Michel Barnier was ousted last week in a historic no-confidence vote in Paris.

ING economist Carsten Brzeski said a quarter-point reduction would follow the ECB’s usual “cautious” approach and amount to a “typical European compromise” between supporters of keeping policy tight and those wanting to ease faster.

While a bigger cut would send “a strong signal that the ECB is seriously trying to get ahead of the curve,” he predicted the central bank would be reluctant to go too far.

With reporting by – © AFP 2024