30.01.25 - ECB dilemma continues

The European Central Bank (ECB) lowered interest rates as expected by 25bps, the fifth consecutive time since it started to lower rates. This happens one day after the Fed decided to leave US rates unchanged.
The ECB tries to support the sluggish economy with lower rates. There was unexpected stagnation in the fourth quarter in 2024, as reported this morning.

Markets: no major impact - waiting for the press conference to see further guidance.

My View: The ECB faces a persistent dilemma, whether to lower rates to support the economy while inflation remains elevated and above the 2% target.
Investors sentiment toward European markets has been subdued for an extended period already. Now, only modest inflows are able to lift markets. Should economic indicators continue to show weakness, further upside potential looks rather limited.

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