Goldman Sachs Raises Euro Area Growth Forecast Amid German Spending Boost

Goldman Sachs expects the ECB’s benchmark interest rate to reach 2% by June 2025

• does not expect the ECB to cut interest rates in July, contrary to its prior forecast of a 25 bps cut.

Goldman Sachs has raised its 2025 economic growth forecast for the euro area by 0.1 percentage point to 0.8%, citing increased military and infrastructure spending, particularly in Germany. The investment bank also upgraded Germany’s 2025 growth outlook by 0.2 percentage points to 0.2%, driven by higher public expenditure on defense and infrastructure projects.

The bank noted that Germany’s shift in military spending is having spillover effects on neighboring countries, prompting faster increases in defense budgets across the euro area. This acceleration in public investment is expected to provide a modest boost to overall economic activity, despite broader concerns about weak growth in the region.

This article was written by Eamonn Sheridan at www.forexlive.com.