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ECB rate cuts will do little to boost GDP

We suspect that the boost to euro-zone economic growth from interest rate cuts over the next year or two will be quite small. The ECB is likely to lower its policy rates only gradually and leave them well above pre-Covid levels. So borrowing costs in the private sector won’t fall very far, households’ and firms’ interest expenditure will remain at multi-year highs, and any increase in lending will be limited.

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