There European Central Bank (ECB) is ready to take breath on Thursday after eight consecutive cuts of interest rates, which they have lowered the cost of the money of 200 basic points in just over a year. Frankfurt should therefore maintain – in an unwelling way – unchanged its monetary policy, marking a pause – temporary or not – in its locking cycle, with the prospect of higher US duties than expected that complicate the forecasts on growth and inflation.
The level of rates
The ECB board of directors should keep the rate on deposits stable at 2.0%, i.e. the main reference rate, a level considered neutral. The ECB will probably underline the idea that this rate continues to be appropriate in the light of the latest economic data and the gradual installation of inflation towards the target.
“The ECB It is ready to keep rates unchanged, with a possible intervention in September, albeit still unlikely. The markets will carefully observe the tone of the next Lagarde statements on commercial risks and the force of the euro. Inflation is close to the target, but duties threats obscure perspectives. It will be the signs of monetary policy, rather than the concrete actions, to guide the reaction of the markets “
David Zahn, Head of European Fixed Income by Franklin Templeton commented.
Lagarde’s words
In the post-Moeting press conference, Christine Lagarde It should underline the importance of maintaining a cautious and flexible monetary policy, based on a continuous risk assessment, without however providing explicit indications on the future moves of the rates.
“Based on the minutes of the previous meeting, the ECB could start modifying its strategy by moving away from an approach strictly based on the data. With the 2% of 2% inflation target, the institution could in fact orient itself towards a risk assessment approach that looks more to the future. The decisions would continue to be a meeting by meeting, without previal commitments regarding the future path of the rates”
Francois Rimeu, Senior Strategist of Credit Mutuel Asset Management said.
The positions of others
In the weeks that preceded the meeting on Thursday, other different positions emerged from important members of the Board of Directors. The Italian Fabio Panetta, considered a “Colomba ”, hIt was said that “if the risks downward on growth were to strengthen the disinflation tendencies, it will be appropriate to continue in the monetary attachment”. For the “Falco” Isabel Schnabel, the interest rates “are in a good position and the bar for a further cut of the rates is very high”.
Concerns about the euro
The central Eurozone bankers are worried because a strong euro damages growth and inflation. Vice -president Luis De Guindos has identified $ 1.20 as a critical point. The euro rose almost 17% from February to early July, reaching the maximum from 2021 around 1.18 dollars, then suffering a slight flexion, a relief since the speed of appreciation began to be really worrying.
