FRANKFURT, Oct 9 (Reuters) - Several European Central Bank (ECB) policymakers are advocating for another interest rate cut next week, as geopolitical turmoil in the Middle East continues to create volatility in energy costs. The ECB has already reduced rates twice this year, and markets are anticipating a cut to the 3.5% deposit rate on October 17, reflecting expectations of accelerated policy easing due to a weak economy and a faster-than-expected slowdown in price growth.
French central bank chief Francois Villeroy de Galhau stated, “A cut is very likely and it will not be the last one, the rhythm depending on how the fight against inflation evolves.” This sentiment aligns with predictions from over 90% of economists surveyed by Reuters, who foresee a cut next week, with many also expecting a follow-up move in December.
Despite this, some policymakers remain cautious. Belgium's Pierre Wunsch expressed uncertainty, highlighting conflicting factors such as weak growth and persistent domestic inflation. He questioned whether a decisive factor necessitating an October discussion exists.
Financial investors project the ECB's deposit rate could drop to 3% by the end of the year and further to 2% by the end of 2025, reaching a level considered neutral for economic growth.
Reporting by Balazs Koranyi; Editing by Toby Chopra.