ARTICLE AD BOX
The entrance to the headquarters of the European Central Bank (ECB) in Frankfurt am Main.
Picture Alliance | Picture Alliance | Getty Images
The European Central Bank is widely expected to deliver a quarter-point rate cut on Thursday, a move that would mark its second reduction to the deposit rate this year following a landmark cut in June.
Some of the main drivers behind an expected rate cut include sluggish economic growth across the euro zone and cooling inflation, which fell back toward the central bank's 2% target in August.
Euro zone inflation dropped to a three-year low of 2.2% in August, down from 2.6% in July. Core inflation, which excludes the more volatile components of energy, food, alcohol and tobacco, remained somewhat sticky at 2.8% in August, down from 2.9% in July.
For many market participants, the big question is not whether the ECB will cut rates on Thursday — but whether it will provide any clues as to what comes next.
Economists at Berenberg Bank expect the ECB to pause when policymakers meet again on Oct. 17, as it had done in July, before reducing rates by another quarter-point on Dec. 12.
The ECB's meeting comes just days before the Federal Reserve appears poised to start its own rate-cutting cycle.
UBS CEO urges ECB to take a cautious approach, suggests a 'moderate' interest rate cut
A "moderate" interest rate cut would be the appropriate course of action for the European Central Bank, according to UBS CEO Sergio Ermotti.
His comments ahead of the ECB's highly anticipated meeting on Thursday, with analysts suggesting that the most likely outcome is for policymakers at the central bank to deliver a quarter-point rate cut.
When asked for his views on the appropriate course of action for the ECB, Ermotti replied, "I guess a moderate cut."
"There is room for the ECB and, in general, the central banks as I said before to maybe to do some cuts, but the scope and size of those cuts have to be coherent with the first mandate, [which] is the fight of inflation and eventually [to] stimulate the economy," Ermotti told CNBC's "Squawk Box Asia."
The ECB, which sets monetary policy for the 20 nations that share the euro, held interest rates steady at 3.75% in July.
— Sam Meredith
ECB likely to reduce rates in September — but no further cuts expected this year, economist says
The big question for many market participants on Thursday is not whether the European Central Bank will cut interest rates — but what comes next.
"I think that it is broad consensus not only among economists but also in the [ECB's governing] council that there will be a rate cut of 25 basis points. The big question is what signals will be sent," Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, told CNBC's "Squawk Box Europe" on Wednesday.
"It is a tricky situation because you have this core inflation which will go up in September, according to our inflation [forecast], to 3.2%. You have also the view of Philip Lane, the chief economist of the ECB, that wage increases will be higher over the second half of this year."
Hamburg Commercial Bank's De la Rubia said he was "quite skeptical" further interest rate reductions would follow a September cut.
"It is an environment where it is difficult to argue, 'OK, now let's move on with further steps.' So, I think they will stick to their meeting-to-meeting approach and be quite cautious," De la Rubia said.
— Sam Meredith
ECB set to cut interest rates just days before the Fed’s big decision
The headquarters of the European Central Bank (ECB) are pictured ahead of an ECB press conference on the Eurozone's monetary policy in Frankfurt am Main, western Germany, on July 18, 2024.
Kirill Kudryavtsev | Afp | Getty Images
The European Central Bank on Thursday is set to cut rates again by 25 basis points just days ahead of the U.S. Federal Reserve beginning its own rate-cutting cycle.
Traders are widely anticipating an interest rate cut at the Federal Reserve's Sept. 17-18 meeting, as well as at the ECB's meeting this week.
In July, the ECB left interest rates unchanged in a unanimous vote following June's landmark cut. At the time it described the potential for a September reduction as "wide open."
The ECB's key interest rate — which helps to price all sorts of loans and mortgages across the bloc — is currently at 3.75% after years of aggressive hikes.
— Annette Weisbach
English (US) ·