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- Eurozone: ECB expected to extend its pause in December – UOB
Eurozone: ECB expected to extend its pause in December – UOB
Economist at UOB Group Lee Sue Ann assesses the latest ECB monetary policy meeting.
Key Takeaways
CPI rose 2.9% y/y in Oct, down from the previous reading of 4.3%, and lower than expectations of 3.1%. Core CPI also eased to 4.2% y/y, from a previous reading of 4.5%. Month-on-month, inflation in the bloc came in at 0.1% m/m, below consensus forecast and the previous month’s reading of 0.3% m/m. We see inflation at 5.6% in 2023 and 2.7% in 2024.
GDP for the Eurozone decreased by 0.1% q/q in 3Q23, from a revised 0.2% q/q gain in 2Q23 (+0.1% q/q previously). Compared with the same quarter of the previous year, seasonally adjusted GDP increased by 0.1%, following a gain of 0.5% in 2Q23. For now, we continue to expect the Eurozone economy to expand by 0.5% in 2023 and 0.8% in 2024.
The latest growth and inflation backdrop certainly adds to the case of the European Central Bank (ECB) standing pat, as it decided to keep its three key interest rates unchanged at the Oct meeting. The ECB weighs in on 14 Dec for its final monetary policy meeting of the year. Given already restrictive financing conditions and a slowing economy, we expect the ECB to maintain rates at the current levels for now.
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