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2025-12-18 14:43:15
[Institution: Lack of Fiscal Consolidation May Limit the Effectiveness of ECB Rate Cuts] 1. Romain Aumond, a strategist at Natixis IM Solutions, pointed out in a report that the lack of fiscal consolidation may limit the effectiveness of the European Central Bank's (ECB) rate cut policy. He analyzed that the ECB's conservative interpretation of the "symmetric inflation target" will continue to suppress the impact of the rate cuts implemented over the past year and a half on the long-term yield curve. 2. Aumond believes that this limitation is mainly due to the expected fiscal deficits in Germany and France in 2026, and the general lack of fiscal consolidation measures in the medium term. He stated that the ECB seems unwilling to acknowledge the crowding-out effect of public spending on private demand in the coming years. The institution is in line with market expectations that the ECB will keep interest rates unchanged at its meeting on Thursday.
