ECB interest rate decision takes center stage ahead of Fed meeting | Wilnesh News

The European Central Bank is preparing to cut interest rates by 25 basis points on Thursday, but strategists at Saxo Bank warned investors that the central bank is unlikely to provide any clear forward guidance.

Althea Spinozzi, head of fixed income strategy at Saxo Bank, said in a research report released on September 6, “The market is widely expected to cut interest rates by 25 basis points at Thursday’s meeting, and we believe the European Central Bank will deliver on its promise.”

“However, don’t expect the ECB to provide any clear forward guidance on what happens next. Policymakers are likely to continue to rely on data and closely monitor the inflation and growth outlook before taking further action,” Spinozzi said.

— Sam Meredith

EUR/USD was mixed ahead of the European Central Bank’s monetary policy meeting.

As of 9:00 a.m. London time on Thursday, the euro was hovering near $1.1 against the dollar, little changed from the previous session.

— Sam Meredith

One strategist said that the monetary structure supporting the global economy is about to undergo a phased change that may stimulate further market gains.

“We’re entering a tapering phase,” John Bilton, global head of multi-asset strategy at J.P. Morgan Asset Management, told CNBC’s “Squawk Box Europe” on Thursday.

“We may see that the European Central Bank may raise interest rates by 25 basis points today, the Federal Reserve may raise interest rates by 25 basis points next week on the 18th, and the Bank of England may raise interest rates by 25 basis points. What we saw in the data yesterday,” he continued.

“So, all in all, we have all the ingredients to begin a fairly lengthy cycle of cuts, but one that may not be associated with a recession — that’s an unusual arrangement,” Bilton said.

“What that means is that, in terms of price discovery, there’s a lot of movement in my mind between people who believe that the Fed is actually late, the ECB is late, that this is a recession, and those who, like me, believe People who believe we don’t have an economic imbalance would actually spur further gains.

— Sam Meredith

Mizuho International strategists expect the European Central Bank to cut interest rates by 25 basis points on Thursday, reducing the deposit rate to 3.5% from 3.75%, followed by two further rate cuts before the end of the year.

Mizuho International interest rate strategist Evelyne Gomez-Liechti said in a research report that the market is divided into 50 basis points and 75 basis points for the European Central Bank’s interest rate cut by the end of 2024.

“September and December are fully priced. Our base case is for the ECB to cut rates at the last three meetings of the year, and we think there is room for more even pricing at the October meeting, making receiving positions still attractive,” Gomer said. S-Lichti said.

Separately, economists at Berenberg Bank said they expected the ECB to pause at its October 17 policymaker meeting before cutting interest rates by another 25 basis points on December 12.

— Sam Meredith

European markets opened sharply higher on Thursday as investors eagerly awaited the European Central Bank’s monetary policy meeting.

Shortly after the opening bell, the pan-European Stoxx 600 index rose more than 1.1%, with all sectors rising.

— Sam Meredith

Economists at S&P Global Ratings said on Thursday that the European Central Bank would remain alert to a range of risks surrounding the growth outlook, including transport costs, energy policy and international trade.

“There are a lot of risks to their outlook,” Sylvain Broyer, chief economist for Europe, the Middle East and Africa at S&P Global Ratings, told CNBC’s “Squawk Box Europe” on Thursday.

“The ECB is concerned about the situation in the labor market, which remains tight, so services inflation accelerated again in the summer because labor costs did not fall as fast as many expected,” Broyere said. .

“The ECB’s focus on the labor market is really a balancing act, with on the one hand the inflation risks associated with labor market tightness, but on the other hand the risk of a reversal and a sharp weakening of growth if labor costs rise. It becomes a problem for employers ,” he added.

— Sam Meredith

The European Central Bank is preparing to cut interest rates by 25 basis points on Thursday, but guiding markets on what to expect in the coming months may be a more difficult challenge, Goldman Sachs economists said.

“I think the first part of the meeting, if you will, is relatively simple. They’re going to take a 25 basis point cut. They’re probably going to make only a minor change to the forecast and they’re going to say we rely on the data and we’re going to continue to do that,” said Jari, chief European economist at Goldman Sachs. “I think that’s the easy part,” Stehn said Thursday on CNBC’s “Squawk Box Europe.” “

“I think the more difficult part is guiding the market in the press conference on the timing of the next rate cut. Here, we think (ECB President Christine Lagarde) will keep a relatively open mind.”

Stern said he expected the ECB to cut its near-term growth forecasts, “but I think they will stick to the broad narrative that Europe is recovering.”

— Sam Meredith

UBS Chief Executive Sergio Ermotti said a “modest” interest rate cut would be an appropriate course of action for the European Central Bank.

His comments came ahead of the European Central Bank’s much-anticipated meeting on Thursday, with analysts saying the most likely outcome would be a 25 basis point rate cut by central bank policymakers.

Asked about his view on the ECB’s appropriate course of action, Ermotti replied: “I think a modest rate cut.”

“As I said before, it is possible that the ECB, and central banks in general, will make some cuts, but the scope and scale of those cuts must be consistent with the first mandate, which is to fight inflation and ultimately stimulate the economy,” Ermotti told CNBC’s “Squawk Box Asia.”

The European Central Bank, which sets monetary policy for the 20 euro zone countries, held interest rates steady at 3.75% in July.

— Sam Meredith

The big question for many market participants on Thursday was not whether the European Central Bank would cut interest rates, but what happens next.

“I think there is broad consensus not only among economists but also on the (European Central Bank Governing Council) committee to cut interest rates by 25 basis points. The big question is what signal that will send,” Chief Economist Cyrus de la Rubbia (Cyrus de la Rubia) said.

“This is a tricky situation because according to our inflation (forecast), core inflation will rise to 3.2% in September. Philip Lane, chief economist of the European Central Bank, also believes that wages will rise. It will be in the second half of the year higher.

Commerzbank’s De la Rubia said he was “quite skeptical” that further interest rate cuts would follow the September rate cut.

“In this environment, it’s hard to argue ‘OK, now let’s move forward with further steps.’ So I think they’re going to stick to the approach of each meeting and be very cautious,” de la Rubbia said.

— Sam Meredith

The European Central Bank will cut interest rates by another 25 basis points on Thursday, just days before the Federal Reserve begins its rate-cutting cycle.

Traders widely expect the Federal Reserve to cut interest rates at its meeting on September 17-18 and the European Central Bank’s meeting this week.

Following June’s landmark rate cut, the European Central Bank voted unanimously to keep interest rates unchanged in July. At the time it described the possibility of a rate cut in September as “open”.

The ECB’s key interest rate – which helps price various loans and mortgages across the euro zone – currently stands at 3.75% after years of steep rate hikes.

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— Annette Weisbach