Goldman Sachs has raised its forecasts for the European Central Bank's benchmark interest rate, expecting it to reach 2% by June 2025. Additionally, it no longer anticipates a cut in the ECB's interest rate in July, contrary to its previous estimates that indicated a reduction of 25 basis points. In related news, the investment bank has also raised its growth forecasts for the Eurozone economy in 2025 by 0.1 percentage points to 0.8%, driven by increased military and infrastructure spending, particularly in Germany. Goldman Sachs has also increased its growth forecasts for the German economy in 2025 by 0.2 percentage points to 0.2%, fueled by a rise in public spending on defense and infrastructure projects. The bank noted that Germany's shift towards increased military spending has ripple effects on neighboring countries, prompting a quicker acceleration in defense budget increases across the Eurozone. This rise in public investment is expected to provide a limited boost to economic activity in the Eurozone, despite broader concerns regarding weak growth in the region.
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