By Francesco Canepa and Balazs Koranyi
FRANKFURT (Multibagger) - As weaker-than-expected economic data continues to emerge, policy doves at the European Central Bank are gearing up for a fight to secure an interest rate cut next month, sources revealed to Multibagger.
The ECB had previously viewed an Oct. 17 rate cut as unlikely, but recent disappointing business surveys, German sentiment data, and a slowdown in wages have emboldened policymakers who advocate for lower rates - or doves - to push for a cut, the sources said.
With energy costs falling and a risk of undershooting the inflation target becoming more apparent, the push for a rate cut is expected to face resistance from more conservative policymakers, known as hawks.
While a compromise solution of holding rates in October but hinting at a cut in December has been discussed, it goes against the ECB's usual approach of making decisions meeting by meeting.
Traders are increasingly betting on an October rate cut, with market prices indicating a 50-60% likelihood of a 25 basis points cut in the deposit rate.
"Overall, September’s PMI data suggests that the euro zone's economic recovery is on shaky ground, which may lead to the ECB considering another cut in October," said Paul Hollingsworth, chief Europe economist at BNP Paribas.
Some economists even anticipate a series of rate cuts from October through to next April, emphasizing the need to act swiftly to support the economy.
As the decision date approaches, the outcome remains uncertain, with swing voters yet to make up their minds and hard data only available at the December meeting.
It will be crucial to monitor how the ECB's decision on interest rates will impact the European economy and financial markets in the coming months.