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ECB rate cut in October remains questionable


October, 22 2024
watermark Economic news

Markets expect a 25 basis point rate cut from the European Central Bank next week. Such a decision, according to experts, will be due to weak economic sentiment and a drop in inflation below 2%.


Several factors speak in favor of a rate cut: growth and inflation forecasts have worsened, disinflationary trends are observed, and some ECB representatives express "dovish" views, that is, they advocate easing monetary policy. 


Experts also note that there is no recent reliable data since September, and dependence on sentiment indicators, which are not always accurate, creates uncertainty. In addition, inflation in the service sector remains at a high level.


The ECB's cautious stance may lead the bank to decide to wait until December, when more recent forecasts will appear, before deciding to cut rates.


During periods of monetary policy easing, the market's influence on the ECB weakens, which reduces the likelihood of making decisions under pressure from expectations. Nevertheless, analysts do not rule out a scenario with a rate cut, especially after the recent weak business activity indicators in the region.


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