Euro Zone Inflation Set to Ease Back to ECB's 2% Target, Markets Expect Interest Rate Cuts - Isabel Schnabel
In a recent speech, ECB board member Isabel Schnabel expressed confidence that Euro zone inflation is likely to fall back to the European Central Bank's 2% target. This news comes as inflation dipped below 2% last month and economic growth is showing signs of weakness. Schnabel's comments have led markets to anticipate a faster pace of interest rate cuts, with the next move expected on Oct. 17.
Schnabel, known for her conservative views, acknowledged the challenges to growth but remains optimistic about inflation returning to target levels. Markets are predicting a 90% chance of a 25 basis point cut in the deposit rate later this month, following previous cuts in June and September.
However, Schnabel also highlighted that the ECB alone cannot address Europe's economic issues, as deep-rooted structural problems continue to hinder growth. Meanwhile, other ECB members, like Portuguese central bank chief Mario Centeno, are concerned about the risk of inflation undershooting the target, which could further dampen economic growth.
In summary, Euro zone inflation is expected to trend lower towards the ECB's target, leading to potential interest rate cuts. The ECB's actions, along with structural challenges in the Euro zone, will play a crucial role in shaping the region's economic outlook in the coming months.