- The ECB lowered interest rates at its policy meeting yesterday in response to inflation falling towards the central bank’s 2% target and fears over the outlook for the economy. The key interest rate was cut by 25bp to 3.5% and follows the same sixed reduction in June and a pause in July. “Based on the Governing Council’s updated assessment of the
inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to take another step in moderating the degree of monetary policy restriction,” it said in a statement. The overall economy is struggling with manufacturers remaining in the doldrums and those concerns prompted the ECB to trim its forecast for 2024 gross domestic product — now seeing expansion of 0.8%
compared with 0.9% in the last round of quarterly projections. The inflation outlook was broadly unchanged. ECB President Christine Lagarde and officials on the Governing Council reiterated that they can’t commit to a specific path for interest rates as the outlook remains “data dependent.” However, markets continue to price in at least one more cut in 2024 followed by further cuts in 2025. - The US dollar remains on the back foot, trending lower as investors continue to mull over recent data, searching for clues to calculate if the Fed will lower rates by 25bp or 50bp at the upcoming policy meeting. Yesterday’s PPI report did little to influence analysts as producer prices picked up only slightly in August after the previous month’s data was revised lower. Former Federal Reserve Bank of New York President William Dudley put the cat amongst the pigeons overnight saying, “I think there’s a strong case for 50,” adding, “I know what I’d be pushing for.”
We are using cookies to give you the best experience on our website. Download the GPS Cookies Policy for more information. The main types of cookies we use are as follows: strictly necessary cookies, performance cookies, advertisement cookies, and analytics cookies. You can find out more about which cookies we are using or switch them off in settings. Except for strictly essential cookies, you have also the option to decline the usage of cookies at any time. You can do this through this cookie management panel, which appears when you first visit, and you can access it independently through the link provided at the foot of the page.