European Central Bank President Christine Lagarde may feel the pressure of being the first to make the decision to cut interest rates. A boldness that took place before any downward movement of the American Federal Reserve (Fed). This is now a thing of the past. Monetary policymakers will reconvene next week and stick to their planned road map, whether or not the Fed plays the card of cutting 50 basis points all at once.
The European Central Bank will announce a further 25 basis point cut in the deposit facility reference rate next Thursday, according to Bloomberg, depending on how currencies are traded. exchanges linked to daily OIS exchange rates. In other words, the benchmark would be 3.25% at next week’s close. The fall in inflation euro zone at 1.8% in September This allows Lagarde to continue its monetary flexibility without risk in the event of further price increases. But the deterioration of the business climate in the euro zone also supports the rate cut in October, according to European economist Ulrike Kastens of the DWS.
Most experts still believe that the ECB will continue to subscribe to the discourse of “data dependence” and “meeting by meeting”, limiting the information that flows from the person responsible for monetary policy to the market which continues to think a slow process but gradual downward adjustment until almost 2026. However, Bank of America believes that Lagarde will go further than the consensus forecast. We are convinced that the neutral rate in the euro zone will be 1.5% and not 2% as the market consensus suggests,” explains the investment bank’s economist, Rubén Segura Cayuela.
Beyond the most important event of the week, in the rest of Europe, September CPI data will be updated for the entire Eurozone as well as countries like Spain. But in neither case is an upward revision of the final data of these price indices expected.
In a context of volatility in the raw materials market, the Organization of the Petroleum Exporting Countries (OPEC) will publish its monthly report on its reading of the global oil market. And on the American side, September data will be published on Thursday. Country Retail Sales and Manufacturing Report from the Philadelphia Fed which will allow the market to know the direction the national economy is taking in mid-October.
The Asian market will be confronted next week with inflation data in Japan, which is expected to fall to 2.5% from 3% the previous month, according to Bloomberg forecasts. And China would once again bring bad news to investors. The economy of the Asian giant would find no signs of recovery in the third quarter of the year. The expert consensus expects that the China’s gross domestic product grows 4.6% between July and September compared to 4.7% for the previous period.
