What should we expect from this week’s ECB meeting?
|Scope Ratings (Scope) expects the ECB to stay on hold this Thursday. The euro area economy has been relatively resilient and Scope foresees slight further upside revisions of growth projections from the ECB by their December update. Most policymakers may feel rates are at the right level presently as inflation risks are comparatively balanced, with greater downside risks for price rises near term but greater upside in the medium to long run. The arguments for a further rate reduction are tempered by the slight rise in September inflation and the slight uptick in wage growth during Q2.
Euro area core inflation remaining slightly above target
Euro area core harmonised price index, % year on year.
Source: Eurostat, Scope Ratings
No further ECB rate reductions during 2025
Scope does not anticipate any further ECB rate reductions this year, but the ECB may keep its options open. The risk to Scope’s base case late this year or next year is for further easing rather than tightening. The direction of the next change in official rates hinges on factors such as the inflation dynamics, the consequences of global trade tensions, the growth outlook and the euro exchange rate. Any move in the euro meaningfully above 1.20 against the dollar as an example may provoke greater concerns. A significant drop in projected inflation for 2028 could push ECB policymakers to contemplate further easing. The rating agency’s expectation of corrections in bubbly financial markets may also raise pressure on the central bank.
US policy is crucial. The continuation of US rate reductions under market and political pressure may add growing pressure on European policymakers to also ease.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.