The European Central Bank on Thursday is set to slash rates again by 25 basis points just days ahead of the U.S. Federal Reserve beginning its own rate-cutting cycle, CNBC reports.
Traders are widely anticipating an interest rate cut at the Federal Reserve’s Sept. 17-18 meeting, as well as at the ECB’s meeting this week.
Holger Schmieding, the chief economist at Berenberg Bank, told CNBC in an email to clients: “Virtually all recent ECB speakers have confirmed that they would like to lower rates. Even Bundesbank President Joachim Nagel, usually considered to be among the hawks on the ECB Council, has indicated that he would support a cut unless the evidence aligns against it.”
In July, the ECB left interest rates unchanged in a unanimous vote following June’s landmark cut. The ECB’s key interest rate — which helps to price all sorts of loans and mortgages across the bloc — is currently at 3.75% after years of aggressive hikes.
Inflation down
Inflation in the euro area has since come down further. Headline figures hit a three-year low in August with a reading of 2.2%, while core inflation by contrast is still more elevated at 2.8% with the services sector pulling up that metric.
The Frankfurt-based ECB is not expected to see a big revision of inflation or growth figures, although some economists predict that a new growth outlook for the euro area will be grimmer than it was in July.
Currently, it seems that the consensus inside the ECB’s Governing Council has moved toward more optimism that the Bank is on the right track in getting inflation back to a 2% target.
The European Central Bank will almost certainly decide a 25-point interest rate cut in their next decision.
