The European Central Bank (ECB) is expected to press the pause button on Thursday as inflation cools down and economic activity stagnates. The decision will be announced in Athens, Greece, which marks one of the rare occasions when the ECB holds its rate decision outside its headquarters in Frankfurt. The announcement is scheduled for 1:45 p.m. local time or 7:45 a.m. Eastern time.
The most recent data indicates that the European economy is struggling. The eurozone manufacturing Purchasing Managers’ Index (PMI) recorded a reading of 43, which suggests deteriorating conditions when the reading falls below 50. In addition, consumer sentiment remains in negative territory. A profit warning from Worldline WO6, -58.50%, a payments company, was attributed to the sputtering German economy, the largest economy in the eurozone.
Inflation has also shown signs of slowing down, with a year-over-year rate of 4.3% in September compared to 5.2% in August.
Carsten Brzeski, global head of macro at ING, commented, “With the latest surge in oil prices and an upward revision of the inflation trajectory in the eurozone for 2024, we cannot entirely rule out the possibility of another rate hike by the ECB in December. However, such an action would not bring significant benefits other than boosting the ECB’s own reputation. But this discussion can wait until December; it is not relevant for next week.”
Brzeski added, “Given all the current uncertainties, there hasn’t been a better moment in the last 16 months for the ECB to take a pause than now.”