Core Viewpoint - The article discusses the evolution of the European Central Bank's (ECB) policy rates in response to economic growth and inflation, highlighting the transition from negative interest rates to a neutral stance and the anticipated shift to rate cuts in 2024 due to stabilizing energy prices and inflation expectations [1][2]. Group 1: ECB Policy Rate Evolution - Since the establishment of the eurozone in 1999, the ECB's policy rate changes reflect economic cycles and global financial conditions [1]. - The ECB entered a negative interest rate era in June 2014, with the deposit facility rate set at -0.10% [1]. - In the second half of 2022, inflation in the eurozone exceeded 10% due to the energy crisis from the Russia-Ukraine conflict, prompting the ECB to initiate its most aggressive rate hike cycle since 1999 [1]. - Starting in 2024, the ECB is expected to shift from a tightening to a neutral policy stance, with rate cuts anticipated in June 2024 as energy prices decline and inflation expectations stabilize [1]. Group 2: Factors Driving European Interest Rate Trends - Economic growth and low inflation have led to a significant decrease in the actual neutral interest rate, forcing the ECB to adopt unconventional monetary policy tools like negative rates and quantitative easing (QE) [2]. - The need to stabilize the financial system during crises, such as the European debt crisis, led the ECB to lower policy rates and implement large-scale asset purchase programs (APP) starting in 2014 [2]. - The global monetary policy environment, characterized by low rates and QE from major central banks, has influenced the ECB's policy decisions and limited its ability to tighten independently [2]. Group 3: Bond Market Performance and Investment Strategies - During the period of interest rates around 1%, the eurozone bond market performed strongly, with major bond indices showing annualized returns of 3.5%-4.5% from 2014 to 2020 [3]. - European institutional investors have favored extending duration and using derivatives for hedging in a low-rate environment [3]. - The article emphasizes the importance of dynamic duration management strategies, optimizing liability product structures, and promoting diversified asset allocation frameworks to enhance investment stability and risk management [4].