By FRANKFURT: The European Central Bank is scheduled to lower interest rates by 25 basis points on Thursday, only a few days before the US Federal Reserve starts its own cycle of rate reductions.
Both this week’s ECB meeting and the Federal Reserve’s meeting on September 17–18 are likely to see an interest rate reduction, according to traders.
In an email to clients, Holger Schmieding, the chief economist of Berenberg Bank, told CNBC that “the rate cut this Thursday should be largely uncontroversial.”
Almost all of the ECB’s recent speakers have expressed a desire to see rates lowered. Even Joachim Nagel, the president of the Bundesbank, who is typically seen as one of the hawks on the ECB Council, has said that he would be in favor of a cut unless the data contradicted him.
Following its historic rate drop in June, the ECB unanimously decided to keep interest rates steady in July. It stated at the time that a September reduction was “wide open.” After years of relentless hikes, the European Central Bank’s benchmark interest rate, which influences the pricing of various loans and mortgages throughout the EU, is currently at 3.75%.
Since then, the euro area’s inflation rate has decreased even more. In August, headline inflation reached a three-year low of 2.2%; however, core inflation, which is driven higher by the services sector, remains higher at 2.8%.
The Frankfurt-based ECB — which sets monetary policy for those 20 nations that share the euro — will also issue a new round of staff projections this Thursday. They are 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.
