Decision-makers supporting an interest rate cut at the European Central Bank are preparing to take a decisive stance on a new rate reduction next month, following a series of weaker-than-expected economic data. While this move may gain strong backing, it is likely to face significant opposition from the more hawkish members who advocate for raising or maintaining interest rates.
Initially, expectations suggested that a rate cut at the October 17 meeting was unlikely, especially after the ECB recently lowered borrowing costs in response to forecasts of weak economic growth and a gradual decline in inflation over the coming year.
However, recent negative data from eurozone business surveys, along with declining consumer confidence in Germany and a sharp drop in wage growth, have emboldened policymakers who favor a rate cut. Additionally, energy prices have fallen significantly in recent weeks, which has heightened concerns that the ECB may fail to meet its long-term targets.
Some sources have raised the possibility of a compromise, where interest rates would remain unchanged in October, with a strong hint of a potential cut in December if the data does not improve. However, this approach contradicts the ECB’s “meeting-by-meeting” policy review strategy.
As the October 17 meeting approaches, still about three weeks away, key data such as September’s inflation figures have yet to be released. Therefore, the decision remains open to all possibilities.
