IMF: Unless new shocks occur, the European Central Bank should keep the interest rate at 2%.

According to a report by Jinse Finance, Alfred Kammer, head of the IMF’s European Department, stated that the European Central Bank should keep the deposit interest rate at the current level of 2% unless a new shock significantly alters the inflation outlook. Since June 2024, the European Central Bank has cut interest rates by two percentage points and hinted this month that it would pause further cuts, although financial investors still believe that the bank will cut rates again to 1.75% later this year. “The inflation risk in the Eurozone is two-sided,” Kammer said. “This is why we believe the European Central Bank should stick to it and not deviate from the 2% deposit interest rate unless there is a substantial shock that changes the inflation outlook.” “So far, we haven’t seen such a significant change.” Part of the reason for the IMF’s differing view from the market is that the IMF expects inflation levels next year to be higher than the European Central Bank’s forecast.