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The European Central Bank is expected to pause on Thursday as inflation cools while activity stagnates.
The ECB is expected to keep its deposit rates at 4%. The decision will be delivered in Athens, Greece — it makes one rate decision per year outside of its Frankfurt headquarters — at 1:45 p.m. local time, or 7:45 a.m. Eastern.
The latest data shows the European economy sputtering. The last reading of eurozone manufacturing PMI was 43, on a scale where readings below 50 indicate deteriorating conditions, while consumer sentiment also is in negative territory. A payments company, Worldline
WO6,
blamed a profit warning on Wednesday on the sputtering German economy, the eurozone’s largest.
Inflation meanwhile has slowed to 4.3% year-over-year in September, from 5.2% in August.
“With the latest surge in oil prices and consequently an upward revision of the inflation trajectory in the eurozone for 2024, we cannot entirely exclude that the ECB would still opt for yet another rate hike in December – not that it would help anything other than the ECB’s own reputation. But this is a discussion for December, and not for next week,” said Carsten Brzeski, global head of macro at ING.
“With all the new uncertainties, there hasn’t been a better moment in the last 16 months for the ECB to take a pause than now.”
Lagarde gave an interview to Greek outlet ANT1 ahead of the decision, saying “we are not done yet” in response to a question about whether inflation would re-accelerate.
Financial markets do expect the ECB is done with hikes, with expectations of cuts next year.
