The European Central Bank is widely expected to announce a reduction in interest rates at its meeting in Frankfurt on Thursday, despite lingering inflationary pressures in the 20-nation eurozone.
Money markets have fully priced in a 25 basis point move lower at the June gathering, and any other outcome would be a shock.
The central bank’s key rate has been at a record 4% since September 2023. A cut would be the ECB’s first since September 2019, when the deposit facility was in negative territory.
Markets have only fully priced one further reduction this year, but economists polled by Reuters last week forecast two more cuts taking place over the period.
Investors will be monitoring the language used in the Governing Council’s statement and the tone struck by ECB President Christine Lagarde in her press conference at 2:45 p.m. Frankfurt time.
Especially important will be the fresh quarterly projections on economic growth and inflation set to be released by ECB staff.
Though the ECB began hiking interest rates later, a June cut would put it ahead of the U.S. Federal Reserve on its march lower, as the world’s largest central bank remains stymied by the rate of U.S. inflation. Lagarde nevertheless said in her last press conference that ECB officials are “data-dependent, not Fed-dependent.”
Canada on Wednesday became the first G7 nation to cut interest rates in the current cycle, while Sweden and Switzerland’s central banks already announced their own rate reductions this year.
Source: CNBC
Recent Comments