Despite a challenging year, analysts see potential for Europe's economy to improve in 2025. They are closely watching factors such as interest rate cuts, potential U.S. tariffs, and the divergence of peripheral economies.
Amid a downbeat outlook for Europe , analysts say there could be some bright spots to watch out for in 2025. Continued interest rate cuts, potential U.S. tariffs and the divergence of peripheral economies are among the factors expected to affect the region's fortunes. Chris Watling, CEO and chief market strategist at Longview Economics, told CNBC that ' Europe 's going to have some good times' — but maybe not for a while. About falling short of its growth potential, Europe 's had a tough year.
Amid a downbeat outlook, however, analysts say there could be some bright spots to watch for in 2025. Markets are pricing in another 25-basis-points cut when the ECB's Governing Council makes its first policy decision of 2025, according to overnight index swap data.'Economic logic argues for 50-basis-points moves, I don't think they'll go for 50 basis points,' he told CNBC's'Street Signs Europe.' 'I find the ECB's tone much too hawkish,' Pickering added, explaining that Europe's economic issues had shifted from supply shocks to demand-side problems — making it doubtful inflation would still be 'sticky' in six months' time. Index swap data suggests that, like Pickering, the majority of traders are expecting the ECB's key rate — currently at 3% — to be reduced to 2% by mid-2025, with some anticipating further cuts in the second half of the year. In a note to clients at the end of November, analysts at Bank of America declared 2025 'the year the policy rate goes below 2%.'Market Sentiment and Confidence, for November, the European Commission found consumer confidence fell 1.2 percentage points year-on-year in the euro zone. Meanwhile, the European Commission's— a confidence score derived from business and consumer surveys — while stable, has remained below its long-term average all year, and is currently slightly lower than where it ended 202
EUROPE ECONOMY INTEREST RATES TARIFFS MARKET SENTIMENT
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