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According to a Bloomberg survey of economists, the European Central Bank (ECB) will continue with its verbal intervention while keeping rates on hold this week.

Key quotes

“The currency’s 10% jump since coronavirus lockdowns started in March makes ECB President Christine Lagarde’s job harder by putting downward pressure on inflation. Combined with signs that the economic recovery is slowing, it boosts the case for more monetary stimulus.

Such action looks unlikely when the Governing Council sets policy on Thursday, but Lagarde and her colleagues might decide to start laying the groundwork in case they do need to act.

No economists expect lower rates this week, but money-market traders this week priced in a 10 basis-point cut in the deposit rate to minus 0.6% for September next year.

Two months ago, they weren’t forecasting such a step until 2022 at the earliest.

Whatever policy makers do, they’ll be careful to describe their actions in terms of the outlook for inflation, rather than the exchange rate.”