English
Français
Deutsch
Italiano
Português
Русский
Español
简体中文
हिन्दी
日本語
A leak on the eve of the European Central Bank’s interest-rate meeting has changed expectations heading into the meeting.
Reuters reported that the ECB staff will raise its inflation forecast for this year and next while lowering its growth forecast.
Swaps trading now imply a roughly two-in-three chance the ECB will hike interest rates from the deposit rate’s current 3.75%. That’s as the central bank has to balance inflation still uncomfortably high, at 5.3% year-over-year for both the headline and for core, with survey data showing the economy weakening, if not unravelling.
The decision will be delivered at 2:15 p.m. local time, or 8:15 a.m. Eastern, followed by a press conference a half-hour later.
The HCOB eurozone composite PMI fell to a 33-month low in August of 46.7, on a scale where readings below 50 indicate deteriorating conditions. Eurozone GDP was revised lower for the second quarter to show scant 0.1% quarter-on-quarter growth. The outlook for key trading partner China is as muddy as ever.
“It was always going to be a close call, with lots of reasons both for and against hiking,” said economists at Nomura led by Andrzej Szczepaniak. “It is the exact same journalist, and likely same source, used in previous Reuters stories which have led the ECB narrative immediately prior to the ECB meeting during the blackout period.”
A scenario where the ECB hikes, skips October, but hikes again in December could be easily imagined, they said.
“The leak must raise the likelihood that the ECB hikes.” added Evercore analysts led by Krishna Guha.
Read the full article here