Frankfurt: Experts think the European Central Bank (ECB) may have ended its cut cycle and that the bank is not expected to cut rates at its next meeting this month due to the ongoing inflation trend in the eurozone and the slow but steady economic recovery.
According to Anadolu Agency, all eyes in Europe turned to the ECB’s monetary policy decision this week, while the ECB President Christine Lagarde’s statements are expected to give hints into the bank’s future policy roadmap. Bas van Geffen, senior macro strategist at Dutch Rabobank, noted that data releases since the September meeting have been slow, suggesting that ‘the doves may cede their push for a cut fairly quickly this month.’
Geffen stated that he does not expect a policy change nor new guidance into future decisions from Lagarde’s speech this week, emphasizing that by December, when a more comprehensive policy discussion will take place, more new data will have been available. He expressed that the ECB’s cutting cycle is effectively done unless significant downside risks materialize.
Marco Wagner, senior economist at Commerzbank, mentioned that the ECB is unlikely to change its key interest rates amid supply chain bottlenecks contributing to inflationary pressure. According to an ECB survey, consumers currently expect inflation to exceed the 2% target.
Peter Vanden Houte, chief economist at the ING Group, pointed out that data releases since September did not provide definitive results while consumption and industrial production in August were ‘disappointing.’ However, the Purchasing Managers’ Index (PMI) in October indicated steady growth despite challenges in the manufacturing sector.
Vanden Houte highlighted that headline inflation in September exceeded the ECB’s 2% target for the first time since April, but energy prices are expected to push inflation below 2% again in the coming months. He concluded that the picture of a steady recovery remains, and the ECB has little reason to alter monetary policy, with interest rates likely to remain unchanged.