TD Securities: ECB needs to cut its policy rate below neutral

Odaily reports that more and more forecasters in the Eurozone expect that after the European Central Bank suspends rate hikes, it will resume rate cuts in 2026, with interest rates falling below 2%. Data shows that the market generally expects European Central Bank officials to further cut rates in March 2026. Although policymakers have become more confident in achieving the 2% inflation target, the threat of US President Trump to impose US tariffs has cast a shadow over the economic outlook. Businesses and households also face the problem of a lack of political direction in France and Germany, whose sluggish economies have been dragging down the development of the entire region. James, head of global macro strategy at TD Securities, said: "The European Central Bank can gradually cut interest rates while avoiding an inflation outbreak. But the impact of the Trump trade war on the EU will be more significant than on countries like the UK, meaning the European Central Bank needs to lower its policy interest rate below neutral levels."