The European Central Bank aims to measure how much traders will be willing to branch from the federal preparation system where the central bank is stuck, so it is widely used to start another interest rate on Thursday and the 2025 meeting. It is expected.
Wednesday’s Money Market has been set in price reductions equivalent to 35 Basis points in the January meeting, indicating that the Central Bank in the Eurosone will be reduced at least one -quarter of central banks. This has been the fifth trim, which is an important rate since the start of monetary policy in June 2024.
Later, the price of the market suggested that follow -up reductions in the ECB’s March and June meetings, and raised the deposit facility to 2 % by the end of the year with the fourth final reduction.
For the third consecutive month in December, even after the increase in European headline inflation, expectations for this year’s quick pace have become solidified. The increase in price increases due to the effects of the energy market, but the BLOC business activity indicators show the continuous weakness of manufacturing and lukewarm consumers. The Economist voted by Reuters hopes that the growth rate in the fourth quarter of the fourth quarter has increased only 0.1 % from 0.4 % in the third quarter.
This week’s ECB rate is almost guaranteed, but there are some important questions that the president, CHRISTINE LAGARDE, is likely to be a quiz at a press conference. Many of them are related to the United States and their new leaders.
One of the concerns is whether the ECB will increase the distance between its own monetary policy route and the world’s largest central bank, or if it is planning to maintain a fee on Wednesday. The market has been priced by reducing only two -quarters of Fed this year, as predicted by the Fed members in December.
Some strategists suggest that the Fed can enact only one cut, at least more detailed about President Donald Trump’s actual policy, his extreme trade threats, and its potential inflation. I’m waiting for the details, so I will step on the water.
Lagarde acknowledged the difference in interviews in the World Economic Forum last week and told the CNBC that it was the result of a different economic environment. The Euro area is stagnant, but the US economy has been growing with solid clips in a higher interest rate environment, and many investors are optimistic in 2025, despite Trump’s uncertainty. 。
“We must look at the differentiations here through growth lenses and spare capabilities built in the United States. The Eurozone is Sandra Horsfield, an Investec economist,” CNBC “on Wednesday. Squawk Box Europe.
“The difference is that inflation is likely to be maintained for a while in the United States,” she said, and she paused after another Fed and in Europe. We predicted that the range of reduction was large.
Currency drag
ECB repeatedly emphasizes not to go ahead of the Fed and focus on inflation and growth domestic pictures. However, the major impact of policy differences is foreign exchange rates, and higher rates tend to increase domestic currency.
This has strengthened the expectation that the euro could be brought back to the parity along with the green back, suggesting even more strength in the combat -like US dollar in 2025. It is important for ECB. Central bank’s major concerns are now related to services and wage inflation generated in Japan.
Lagarde neglected the effects of this effect and told the CNBC that the exchange rate was “interested, … the result could occur.”
However, she also stated that she was not worried about importing inflation from the United States to Europe, and continued to anticipate the rise in price. The ECB president added that the dullness around the US economy was “positive because the US growth is always an advantageous factor in the world.
Trade question
Weaker euros can be a factor in spurning the ECB and reducing the rate slightly, but Trump focuses on global or Europeans that delay the growth of the euro and generate more needs. Cut that can cause a trade war.
The US President has not re -entered his universal tariff ideas on imports to the United States, and is currently zero for duty for China, Mexico and Canada. However, in a speech at the World Economic Forum, he accused the European Union in trade very unfairly, and accused him that “we intend to do something about it.” 。
According to George Lagarias, Chief Economist of FORVIS MAZARS, the trade war could confuse global supply chains and guarantee higher interest rates in ECB.
“Inflation and rate risks are definitely advantageous,” he told CNBC by email.
“The expectation of the EU company’s selling price has been flattened, and it is a major indicator of ECB’s own prediction … and the Fed is probably in the hawk route. Towards, “he added.
He said that the ECB could enact a larger half -point rate reduction: Political uncertainty in France and Germany, or loose financial policy in Italy does not cause a sharp rise in borrowing rates. “
“Raboresearch’s senior macrostratistist, BAS VAN GEFFEN,” has predicted that inflation is more optimistic than ECB, or the market will decrease to 2.25 % this year.
“When the ECB incorporates Trump’s tariffs in the bass line scenario, we will expect more inflation prediction on their side,” he told CNBC.
