The eurozone economy unexpectedly stagnated in the fourth quarter of 2024, putting pressure on the European Central Bank to implement more aggressive interest rate cuts. This lack of growth, coupled with a manufacturing downturn in Germany, the region's largest economy, highlights the challenges facing the eurozone. Analysts predict that the ECB will respond with further rate cuts this year, exceeding current market expectations.
The euro zone economy unexpectedly stagnated in the fourth quarter, increasing pressure on the European Central Bank (ECB) to implement more aggressive interest rate cuts. The quarter's lack of growth contrasts with economists' forecasts of a 0.1% expansion and follows a 0.4% growth rate in the third quarter. Eurostat reported that the euro zone economy expanded by 0.7% for 2024.
This data release precedes the ECB's anticipated decision to lower its benchmark interest rate by a quarter point to 2.75%, the lowest level since early 2023. \Analysts predict that this stagnation will compel the ECB to make more rate cuts this year than currently anticipated by the market. The situation highlights the challenges facing the region as Germany, the eurozone's largest economy, grapples with a severe manufacturing downturn. German GDP contracted by 0.2% in the final three months of 2024, while France's economy unexpectedly shrank by 0.1%. In contrast, Italy's output remained stable. Following this data, traders have increased their bets on the ECB implementing four rate cuts in 2024, according to the swaps market. The euro, which has weakened in recent months as the paths of US and European interest rates diverge, showed little change at $1.041. \This deteriorating picture in the euro zone stands in contrast to the US, which the IMF projects to grow by 2.7% this year, approaching its 2024 pace. The US Federal Reserve decided to keep interest rates unchanged on Wednesday
Eurozone Economy Stagnation Interest Rates European Central Bank
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