FRANKFURT, Oct 9 (Reuters) - Several European Central Bank (ECB) policymakers are advocating for another interest rate cut as early as next week, responding to ongoing economic challenges and volatility in energy costs due to turmoil in the Middle East.
The ECB has already reduced rates twice this year, and financial markets are almost fully anticipating a cut to the 3.5% deposit rate on Oct. 17. This reflects expectations that the bank will continue easing policy amidst a weak economy and a faster-than-expected slowdown in inflation.
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." More than 90% of economists polled by Reuters predict a cut next week, with many expecting a subsequent reduction in December.
Despite the consensus, some policymakers, like Belgium's Pierre Wunsch, expressed caution, citing conflicting economic signals, including weak growth and persistent domestic inflation. Wunsch emphasized the need for a thorough analysis from the central bank's staff before making a decision.
Market expectations suggest the ECB's deposit rate could decrease to 3% by the end of the year and further to 2% by the end of 2025, a level viewed as neutral for economic growth.
Reporting by Balazs Koranyi; Editing by Toby Chopra