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ECB Preview: Political uncertainty strengthens case for September rate cut – Societe Generale

Following the relatively data-insensitive rate cut in June, European Central Bank (ECB) speakers have stuck to the data-dependent message. Next week’s ECB meeting will likely take into account available data and compare it with the latest forecasts, notes Anatoli Annenkov, Senior European Economist at Societe Generale.

Possible rate cut in September

“Following the relatively data-insensitive rate cut in June, ECB speakers have stuck to the data-dependent message. With data being weak, we think the odds are on for another cut in September. Therefore, next week’s ECB meeting will likely mainly take into account available data and compare it to the latest forecasts, with the press conference likely to be the most interesting part.”

“We continue to believe that risks to inflation are on the upside, possibly forcing the ECB to pause any rate cuts in December. The Governing Council may also have some initial discussions on the upcoming Strategy Review. Comments made at the ECB’s recent annual Sintra conference highlighted that some policymakers are uncomfortable with past QE, urging a review of its benefits and a commitment from the ECB to implement it.”

“As we have long argued, support for large-scale QE may be less obvious in retrospect given the relatively small impact on inflation, as well as having unintended side effects. This argues, in our view, for much more targeted and temporary interventions going forward, predominantly targeting financial stability.”

Source: Fx Street

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