Central bankers love to steer the market, but the messages coming from European Central Bank officials on what they will do on Thursday are anything but crystal clear.
The HCOB eurozone composite PMI fell to a 33-month low in August of 46.7, on a scale where readings below 50 indicate deteriorating conditions. Eurozone GDP was revised lower for the second quarter to show scant 0.1% quarter-on-quarter growth. The outlook for key trading partner China is as muddy as ever.
“Should we judge that the policy stance is inconsistent with a timely return of inflation to our 2% target, a further increase in interest rates would be warranted. In an environment of tight labor markets and structural inflationary headwinds, this would also insure against the continued elevated risk of inflation remaining above our target for too long,” said Schnabel.
Michael Brown, market analyst at Trader X, said Schnabel’s speech was what led him to expect the ECB will keep rates steady. “That’s what tipped the balance for me, probably the most influential hawk on the [governing council] turning more dovish/cautious,” he said. While he said it’s easy to make either case, the balance of risk tilts towards unchanged interest rates.
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Source: Reuters - 🏆 2. / 97 Read more »