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- ECB Preview: It is difficult to tell how the Euro is going to react – Commerzbank
ECB Preview: It is difficult to tell how the Euro is going to react – Commerzbank
Today the ECB will decide about its future monetary policy. Economists at Commerzbank analyze how the Euro could react.
What will the ECB decide?
Our experts assume that there will be no further rate step and that as a result, the deposit rate will have peaked at 3.75%. However, today’s decision is likely to be tight, as some hawks on the Council have been in favour of rate hikes until now.
The market sees a high likelihood that the ECB might cut interest rates again next year. Hence, it might make sense for the ECB to hike the key rate again today, to then send out a signal next year and cut interest rates at least once in order to support the economy. However, due to the fact that (core) inflation remains stubbornly above target our expects do not expect any ECB rate cuts in 2024.
In view of diverging views, it is difficult to tell how the Euro is going to react today. Everything seems possible. It therefore makes sense in our view to hedge the side that will be most painful and to otherwise see what today’s meeting will bring in the end.
See – ECB Preview: Forecasts from 10 major banks, a hike or a hawkish pause?
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