Europe’s return to zero rates a possibility

(FILES) A euro currency sign is pictured inside the headquarters building of the European Central Bank (ECB) on June 6, 2024. (Photo by Kirill KUDRYAVTSEV / AFP)

IF markets are correct, inflation-adjusted European Central Bank (ECB) interest rates could be back negative by the middle of next year – and a return to zero policy rates cannot now be dismissed.

The sands under ECB easing expectations appear to have shifted again after last week’s third rate cut of the year and with headline inflation at least now back well below the targeted 2%.