The European Central Bank is set to cut interest rates again by 25 basis points on Thursday, just days before the US Federal Reserve (Fed) opens its own monetary policy easing cycle.
“The rate cut this Thursday should be largely uncontested,” Holger Schmidding, chief economist at Berenberg Bank, told CNBC.
“Almost all ECB representatives in recent statements have confirmed that they would like to cut interest rates. Even Bundesbank President Joachim Nagel, usually considered one of the hawks on the ECB’s Governing Council, has said he would support a cut unless the evidence aligns against it,” Schmieding added.
In July, the ECB left interest rates unchanged in a unanimous vote after a landmark cut in June. At the time it described the possibility of a September cut as “wide open”.
The ECB’s key interest rate currently stands at 3.75% after years of aggressive hikes.
Inflation in the Eurozone has since fallen further. The headline figures reached a three-year low in August at 2.2%, while core inflation is still elevated at 2.8%.
The ECB will also issue new forecasts for the Eurozone economy on Thursday. There is not expected to be much revision to the inflation or growth figures, although some economists predict the new growth outlook will be bleaker than it was in July.
The key question, of course, is what will come next.
Most analysts expect the ECB to pause in October, when policymakers meet in Ljubljana, Slovenia. However, there is a slight chance that the Bank will not delay and move quickly, as keeping interest rates too high carries risks.