It appears unlikely that a 0.5 percentage-point rate cut could be in store, despite headline inflation having settled near the ECB’s 2% target.
European Central Bank policymakers are set to hold their last meeting of the year on Thursday, with expectations firmly set for the fourth quarter-percentage-point interest rate cut of 2024.Such a move would take the deposit facility — its most closely-watched rate — to 3%. The rate had been held at 4% since Sept. 2023, prior to the first cut of the current easing cycle in June 2024.The ECB has done little to sway market predictions of a smaller trim.
Headline inflation in the euro area may have cooled near to the European Central Bank's 2% target in recent months, but core inflation — excluding the effects of energy, food, alcohol and tobacco — has held at 2.7% for three straight months.In its most recent forecast in September, ECB staff macroeconomic projections put average euro area inflation at 2.5% in 2024, 2.2% in 2025 and 1.9% in 2026. Those forecasts were unchanged from June.
"This is the ECB, so they always move very slowly... part of the problem is the ECB council is very divided," Fabio Balboni, senior European economist at HSBC, previously told CNBC's"Squawk Box Europe," forecasting"very lively debate" at the December meeting and a 25-basis-point decision.
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