Spotlight on the European Central Bank (ECB) which is preparing to further reduce the cost of money 25 basis points. Wait today on Thursday 17 April, a reduction that many are taken for granted, in the wake of commercial tensions and strengthening of the euro.
Rates, ECB: new cutting expected
“The US duties against the EU and many other countries – he explains Carsten Brzeski, Global Head of Macro by Ing – They reported the concerns about the growth of the Eurozone, at least in the short term. The strengthening of the euro and the decrease in energy prices have been added to the disinflation forces that the current commercial tensions will have on the area. Consequently, the ECB, which only a few weeks ago seemed hesitant in deciding between a break and a next cut of the rates, this week will have to continue its current locking cycle. As in October, a cut of the rates this week can be easily labeled as an insurance cut; A cut that cannot do damage, while remaining waiting not only would question the will of the ECB to support growth, but could also lead to a further and unjustified strengthening of the euro. The exchange rate of the weighted euro for trade is currently at the highest level since the beginning of the monetary union “.
Faro on next moves
With the expected cutting of the rates, the ECB will also have to change its communication. Instead of saying “monetary policy is becoming significantly less restrictive”, the ECB will probably report that, At 2.25%, the deposit rate would now be in the interval of neutral interest rates.
Decisions remain unpredictable
Looking to the future, “there are at least Two main challenges for the ECB. The ongoing commercial tensions and the high level of uncertainty could force it to reduce interest rates more than they want to admit. At the same time, the strengthening of the euro exchange rate, not only against the dollar, will exercise greater disinflation pressure on the eurozone. Anticipate a part of this pressure could Push the ECB to open the door to an accommodating monetary policy at least verbally. “
“The prices of oil and gas are falling. The euro has risen by 10% compared to the US dollar after the minimums of this year. The prospects of 5 -year inflation are equal to 1.7% in the best hypotheses (according to swaps on inflation). And the progress of the trust of businesses and families does not let anything good for the expectations of economic growth. All these factors indicate a probable reduction of the interest rates central banks ”, underlines Kevin Thozet, Member of the Investment Committee of Carmignac explaining that “beyond the meeting on Thursday, Monetary policy decisions remain unpredictable. The prevailing level of uncertainty involves the inability to provide clear and far -sighted indications “.
