Before we get to the BOE meeting next week (and, of course, the US Fed), we’ll be watching what the European Central Bank does and says at its policy gathering this Thursday.
The ECB is widely expected to cut rates again, following an initial move in July, but investors will be particularly keenly watching for indications on what’s to come later in the year.
Traders are currently pricing in another 25-basis-point cut from the euro zone central bank before the end of the year, probably at its December meeting. Though it may be reluctant to commit to that this week, having stressed that its decisions are being led by data.
Bloomberg Economist David Powell explains:
“Our view is that the ECB will cut again by another 25 bps in December. However, the elevated rate of wage growth and sticky services inflation should cause the Governing Council to refrain from committing to that in advance.
Lagarde is likely to emphasise at the press conference that the next move after September is completely data-dependent. At the same time, she probably won’t want to significantly change market expectations for another cut by year end. That will probably leave her focusing more on justifying the cut in September than looking ahead.”