Investors brace for potential ECB rate cut – Bloomberg

European Central Bank (ECB) officials might soon prepare investors for another interest-rate cut, but this will likely occur only after one of the Governing Council’s longest summer breaks between decisions, according to an article by Bloomberg on Sunday.

The article indicated that traders were likely to closely watch for any clues from President Christine Lagarde on the prospects for the September 12 decision, with a move on Thursday effectively ruled out as policymakers take time to assess the strength of lingering inflation pressures.

By then, the ECB will have two additional monthly consumer price readings and newly compiled forecasts available. Several policymakers have expressed a preference for acting during quarterly meetings when fresh projections are presented.

Officials may also have a clearer understanding of the Federal Reserve’s intentions. With new data indicating that US inflation has slowed to its lowest pace since 2021, there is growing speculation that US policymakers may also aim to cut rates in September.

According to the writers, the Governing Council will review new information before its decision on Thursday. This includes a reading of industrial production for May on Monday, expected to show a second consecutive month of contraction, and a final measure of inflation for June, due on Wednesday.

Besides questions on the trajectory of borrowing costs, the ECB president may also face inquiries this week about France. The country is under increased financial market scrutiny due to concerns about its fiscal outlook after snap elections resulted in a hung parliament. This situation may also be a focal point for the European finance ministers meeting in Brussels on Monday.

Attribution: Bloomberg