Victor Trokoudes predicts that the ECB and Fed could implement synchronized rate cuts in 2024 to combat inflation and boost economic activity. ECB’s cautious approach amidst global uncertainties, with potential rate cuts looming, reflects the intertwined nature of fiscal policies, market responses, and labor market resilience in shaping the future economic landscape.
The recent ECB interest rate cut is poised to bolster the Cypriot economy by lowering borrowing costs and potentially spurring business loans and investments. While the impact remains uncertain due to global geopolitical uncertainties, the move is expected to provide companies in Cyprus with access to more affordable credit, paving the way for economic growth.
Implementing a bank windfall tax in Cyprus could threaten financial stability and hinder credit provision, as advised against by the ECB. Erol Riza, a banking expert, recommends voluntary bank contributions to support economic wellbeing and ensure stable banking practices in Cyprus.
Cyprus’s bonds stand strong in the Eurosystem, holding steady at €6.76 billion despite the ECB’s deleveraging efforts. Representing 29% of Cyprus’s government debt, these bonds play a crucial role in the ECB’s asset purchase programs, reflecting a mediumterm investment horizon.
Cyprus banks are enjoying soaring profits thanks to interest rate hikes by the European Central Bank (ECB). However, they are showing reluctance to support growth projects and instead prefer to deposit funds with the ECB, which offers a secure 4% return. This conservative approach is posing a challenge for policymakers who want the banks to play a role in supporting the real economy.
