ECB likely to start rate cutting in Q1: deVere CEO

<p><strong>By George Prior </strong></p>
<p>The European Central Bank is likely to cut interest rates next year, which could have far-reaching consequences for investors worldwide, predicts the CEO of one of the world’s largest independent financial advisory asset management and fintech organizations.</p>
<p>Nigel Green of deVere Group’s comments come as ECB Board member, Isabel Schnabel, who has previously been one of the most hawkish of the Board, told <em>Reuters</em> on Tuesday that given a “remarkable” fall in inflation, the central bank can now take rate hikes off the table.</p>
<p>Euro zone inflation fell to 2.4% last month, down from above 10% a year earlier.</p>
<p>He comments: “When the hawks turn dovish, and as inflation falls to within touching distance, it is reasonable to assume that the ECB will start to cut rates.</p>
<p>“We now expect this to begin in the first quarter of 2024.”</p>
<p>If the ECB decides to cut interest rates, European investors are likely to experience both challenges and opportunities.</p>
<p>“On the one hand, lower interest rates can boost economic growth, leading to increased corporate profits and potentially higher stock prices.</p>
<p>“However, on the downside, savers and bond investors could face diminished returns. The repercussions of ECB interest rate cuts extend beyond Europe, influencing global bond markets.</p>
<p>“As the ECB lowers rates, it can be expected to trigger a broader trend of falling yields in bond markets worldwide.</p>
<p>“Fixed-income investors across the globe, seeking higher returns, may shift their attention to riskier assets.”</p>
<p>Another channel through which the ECB’s policy decisions affect global investors is currency markets. A rate cut by the ECB is likely to lead to a depreciation of the euro against other major currencies.</p>
<p>This can impact international investors holding euro-denominated assets, either positively or negatively, depending on their exposure and hedging strategies. For instance, European exporters may benefit from a weaker euro as it makes their goods more competitive in global markets.</p>
<p>Equity markets around the world are, of course, closely interconnected, and changes in one major economy can have ripple effects globally.</p>
<p>“A rate cut by the ECB could be expected to inject liquidity into financial markets, leading to a surge in equity prices. International investors could find opportunities for capital appreciation, especially in sectors that are sensitive to interest rates, such as real estate and utilities.”</p>
<p>Nigel Green concludes: “We now expect that the ECB could be among the first of the major central banks to start cutting interest rates in the first quarter of 2024.</p>
<p>“Investors across the globe will be closely monitoring developments and potentially adjusting their strategies to adapt to the evolving economic landscape.”</p>
<p><strong>About:</strong></p>
<p><em>deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.</em></p>