Monetary-policy meeting at the ECB
Interest-rate announcement Current interest rate level: 4.00% • In favour of unchanged interest rates: • The ECB has recently indicated higher interest rates • The economic indicators cannot justify an interest-rate cut • The risk of inflation is still on the upside • In favour of 25bp cut: • General expectations in the market of a softening from the ECB • Weak PMI figures this week • Slowdown in economic growth in the US
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ECB: Preview of meeting on 7 February
The ECB is being challenged by softer activity data and the highest inflation rate in 14 years. We think that the ECB will remain in a “wait and see” mode on Thursday with an unchanged bias toward rate hikes in order to send a clear signal to wage negotiators in Germany. However, the market will focus on any signs that the ECB may be changing its growth assessment and whether a hike was discussed as it had been at the previous meetings. We recommend being neutral into the meeting.
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