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The European Central Bank is widely expected to leave interest rates unchanged Thursday, following the Federal Reserve in September.
It’s set to be the first time since July last year that President Christine Lagarde and her colleagues decline to tighten policy. In August, the ECB lifted the rate by a quarter point as it published forecasts showing that inflation will hold above 3% next year, well above the 2% target.
The ECB may well have reached the peak of its interest-rate cycle, as the same forecasts showed growth remaining weak next year. Higher oil prices amid violence in the Middle East are clouding the outlook. Energy costs could fan inflation while also slowing the economy further.
“We expect the ECB to keep rates on hold,” said ING strategist Carsten Brzeski. “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.”
While the latest inflation reading for the euro region remains high at 4.3%, the rate has tumbled from more than 10% a year ago. Yannis Stournaras, the Greek central bank governor, said in an interview with the Financial Times last week that the ECB could start considering rate cuts by the middle of next year.
For now, Lagarde may talk about the possibility of more rate hikes to ensure inflation stays under control. She will hold a press conference in Athens, Greece after the decision, where the ECB’s governing council is holding one of its occasional meetings outside of its headquarters in Frankfurt.
Write to Brian Swint at [email protected]
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