ECB Likely to Lower Rates by 25 Basis Points on September 12: Analysis and Expectations
As the world's best investment manager and financial market's journalist, I bring you the latest insights on the upcoming ECB meeting. After a pause in July, the ECB is expected to lower interest rates by 25 basis points on September 12. However, there is no guarantee of unanimity among members. Doves are worried about slowing growth, while hawks are hesitant about committing to more rate cuts without further reassurances.
Analysts, such as Annalisa Piazza from MFS Investment Management, anticipate the rate cut based on signs of moderation in the real economy and updated projections showing a return to target inflation levels by the second half of 2025. The market has already priced in this cut, with expectations of a gradual rate-cutting cycle as the baseline.
The decision this week is unlikely to cause major market moves unless the ECB hints at a faster pace of cuts in the short term. The central bank is expected to maintain a data-driven approach and wait for further evidence of a decline in core inflation before making further decisions.
During the press conference, investors will be watching for the ECB's assessment of downside risks to growth and the stance of more "hawkish" members. With risks to growth increasing and disinflation driven by demand, the ECB will need to consider a less restrictive approach in the future to avoid a medium-term disinflationary spiral.
Overall, central banks around the world are in "rate-cut mode," and markets are expecting substantial cuts in the coming months. The ECB's decision this week will set the tone for future monetary policy moves. President Lagarde is likely to remain cautious and emphasize that monetary policy will continue to depend on data and forecasts.
In conclusion, the ECB's rate cut on September 12 is widely expected, and the market will be looking for clues about the future path of monetary policy. The central bank's decision will impact financial markets and the economy, so it is important to stay informed and prepared for potential changes in the coming months. Investment Managers and Financial Journalists Predict ECB Rate Cuts: What You Need to Know for Your Finances
In the latest data flow, the Eurozone national accounts reveal that firms are countering labor cost increases by cutting their margins. This shift is significant for investors as it could impact market expectations for rate cuts by the European Central Bank (ECB) in the upcoming months.
As a top investment manager, I, David Chappell, Senior Fixed Income Portfolio Manager at Columbia Threadneedle Investments, analyze the potential impact of the ECB's cautious approach to rate cuts. The ECB is currently normalizing its rate cut schedule, with expectations for cuts every two meetings. However, the decision by the Federal Reserve on September 18 will influence the ECB's discussions in the coming months.
Alessandro Tentori, Chief Investment Officer of AXA IM Italia, highlights the uncertainty surrounding a potential new cut by the ECB this week. While a 25 basis point cut is already priced in by the market, there are dissenting views within the ECB's Governing Council. Chief Economist Philip Lane has also noted that a return to the inflation target is not guaranteed, raising questions about the future direction of monetary policy.
Looking ahead, central banks are aiming for a neutral monetary policy by 2025, balancing economic growth without excessive stimulation. The challenge lies in determining the neutral interest rate, which remains unknown. A trial-and-error approach may be necessary to assess the impact of rate cuts on the economy.
In the coming months, the ECB will conduct a strategy review, focusing on defining rules for future debt purchase programs and addressing major inflationary shocks. These discussions will shape the future of monetary policy and must be carefully evaluated to minimize any negative side effects.
As an investment manager at abrdn, I, Alex Everett, emphasize the importance of normalizing monetary policy after aggressive tightening in recent years. While a global recession seems unlikely, central banks must strike a balance between rate cuts and economic growth. The ECB and BoE's recent decisions highlight the challenges of navigating uncertain economic conditions.
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