Heading to Principal’s Office for a Pint: Windsor’s Schoolhouse Brewery | SaltWire - For a year European Central Bank interest rate hikes were a done deal for markets, but that phase is over with investors struggling to gauge the outcome of Thursday's policy meeting.
"It's such a close call between the pause and the rate hike," said ING's global head of macro Carsten Brzeski.Traders are torn but favour an ECB pause, pricing in around a 40% chance of a hike. Those odds keep swinging. But economic activity is contracting fast and a cumulative 425 bps of rate hikes have squeezed financing conditions. Lending growth is slowing and euro zone money supply shrank for the first time since 2010 in July.
"If it's a hike it will be accompanied by a more dovish statement," said Brzeski at ING."If it's a pause it will be accompanied by a more hawkish statement because in no way can I see the ECB officially announcing the end of rate hikes." Chief economist Philip Lane, close to the forecasts, has said the slowdown in core inflation was in line with June projections.
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