Goldman economist says an ECB rate cut is the easy bit — the harder part is what comes next
The European Central Bank is poised to deliver a quarter-point rate cut on Thursday, according to an economist at Goldman Sachs, but guiding the market on what to expect over the coming months is likely to be a tougher challenge.
“I think the first part of the meeting, if you like, is relatively straightforward. They will cut [by] 25 basis points. They will probably just make small changes to the projections, and they will say we are data dependent, we go meeting by meeting. I think that’s the easy part,” Jari Stehn, chief European economist at Goldman Sachs, told CNBC’s “Squawk Box Europe” on Thursday.
“The harder part, I think, is going to be in the press conference to guide the market in terms of what the timing is of that next rate reduction. And here, we think [ECB President Christine Lagarde] will leave relatively open.”
Stehn said he expects the ECB to downwardly revise its near-term growth projections, “but I think they will hold on to the broad narrative of a recovery going on in Europe.”
— Sam Meredith
UBS CEO urges ECB to take a cautious approach, suggests a ‘moderate’ interest rate cut
A “moderate” interest rate cut would be the appropriate course of action for the European Central Bank, according to UBS CEO Sergio Ermotti.
His comments ahead of the ECB’s highly anticipated meeting on Thursday, with analysts suggesting that the most likely outcome is for policymakers at the central bank to deliver a quarter-point rate cut.
When asked for his views on the appropriate course of action for the ECB, Ermotti replied, “I guess a moderate cut.”
“There is room for the ECB and, in general, the central banks as I said before to maybe to do some cuts, but the scope and size of those cuts have to be coherent with the first mandate, [which] is the fight of inflation and eventually [to] stimulate the economy,” Ermotti told CNBC’s “Squawk Box Asia.”
The ECB, which sets monetary policy for the 20 nations that share the euro, held interest rates steady at 3.75% in July.
— Sam Meredith
ECB likely to reduce rates in September — but no further cuts expected this year, economist says
The big question for many market participants on Thursday is not whether the European Central Bank will cut interest rates — but what comes next.
“I think that it is broad consensus not only among economists but also in the [ECB’s governing] council that there will be a rate cut of 25 basis points. The big question is what signals will be sent,” Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, told CNBC’s “Squawk Box Europe” on Wednesday.
“It is a tricky situation because you have this core inflation which will go up in September, according to our inflation [forecast], to 3.2%. You have also the view of Philip Lane, the chief economist of the ECB, that wage increases will be higher over the second half of this year.”
Hamburg Commercial Bank’s De la Rubia said he was “quite skeptical” further interest rate reductions would follow a September cut.
“It is an environment where it is difficult to argue, ‘OK, now let’s move on with further steps.’ So, I think they will stick to their meeting-to-meeting approach and be quite cautious,” De la Rubia said.
— Sam Meredith
ECB set to cut interest rates just days before the Fed’s big decision
The headquarters of the European Central Bank (ECB) are pictured ahead of an ECB press conference on the Eurozone’s monetary policy in Frankfurt am Main, western Germany, on July 18, 2024.
Kirill Kudryavtsev | Afp | Getty Images
The European Central Bank on Thursday is set to cut rates again by 25 basis points just days ahead of the U.S. Federal Reserve beginning its own rate-cutting cycle.
Traders are widely anticipating an interest rate cut at the Federal Reserve’s Sept. 17-18 meeting, as well as at the ECB’s meeting this week.
In July, the ECB left interest rates unchanged in a unanimous vote following June’s landmark cut. At the time it described the potential for a September reduction as “wide open.”
The ECB’s key interest rate — which helps to price all sorts of loans and mortgages across the bloc — is currently at 3.75% after years of aggressive hikes.
— Annette Weisbach