European Central Bank expected to cut interest rates four more times this year
We expect the ECB to cut interest rates four more times this year, including on Thursday 30th January. The key question for this week is whether the cut will be a 0.25% or 0.50%.
One of the big dilemmas for the Irish people is what to do with their savings, given the series of rate cuts we are going to see. With such low deposit rates, putting your money in the bank at the moment is only a little bit more attractive than putting it under the bed! Now is the time for Irish people to consider a more diversified savings strategy. While property prices are continuing to rise, they are already at elevated levels, and given the historical experience with the Irish property market, it is important to take a diversified approach that doesn’t put all your savings in one basket.
And now there is the Trump card to consider. President Trump and his trade protectionist rhetoric is yet another dampener of sentiment.
Having calmed inflation, the main focus of the ECB rate cuts is stimulating the European economy, which on the whole is lacking in energy and dynamism and has been struggling with the after-effects of the Ukraine war and the pandemic. And now there is the Trump card to consider. President Trump and his trade protectionist rhetoric is yet another dampener of sentiment. The German economy is the dominant driver of the European economy. But, quite simply, Germany is stagnating and needs a shot of adrenalin to get it moving forward again. Without this, Europe as a whole will struggle to get back on to a much-needed sustainable long-term growth path.
Fortunately, Ireland is one of the few countries that is bucking the overall European trend. President Trump is in some ways looking to replicate the success story of the Irish model in seeking cuts to US corporation tax to attract investment. Understandably, there is concern about the impact of his policies on Ireland, but in my view, this will be limited. I think Ireland will continue to remain as a very attractive place to invest. It is a dynamic, export-oriented country with a flexible workforce, and ECB rate cuts will provide further help to the economy.
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