The European Central Bank will likely cut interest rates next year, which could have far-reaching consequences for investors worldwide, predicts Nigel Green, CEO of deVere, one of the world’s largest independent financial advisory asset management and fintech organisations.

ECB Board member Isabel Schnabel, who has previously been one of the most hawkish on the Board, told Reuters on Tuesday that given a “remarkable” fall in inflation, the central bank can now take rate hikes off the table.

Nigel states that “when the hawks turn dovish, and as inflation falls to within touching distance, it is reasonable to assume that the ECB will start to cut rates. We now expect this to begin in the first quarter of 2024.”

If interest rates are cut, European investors will likely experience challenges and opportunities.

“On the one hand, lower interest rates can boost economic growth, leading to increased corporate profits and potentially higher stock prices. However, on the downside, savers and bond investors could face diminished returns. The repercussions of ECB interest rate cuts extend beyond Europe, influencing global bond markets. It can be expected to trigger a broader trend of falling yields in bond markets worldwide where Fixed-income investors across the globe, seeking higher returns, may shift their attention to riskier assets.”

Investors across the globe will be closely monitoring developments and potentially adjusting their strategies to adapt to the evolving economic landscape. Talk to your advisor about locking in interest rates before they fall next year.