The majority of economists polled by Reuters predict that the U.S. Federal Reserve will not raise interest rates again, and they expect the central bank to wait until at least the end of March before cutting them, as the probability of a recession within a year falls to its lowest level since September 2022.
Traders have reduced their expectations for a September interest rate hike in the euro area after weak business activity data from Germany.
The Central Bank of Turkey is expected to continue its policy tightening, but doubts remain as to whether the pace of tightening will be sufficient, given the high inflation rate; meanwhile, the focus in the US is on the jobs market and the unemployment rate's impact on inflation, and pessimism reigns for the euro due to concerns about the ECB's ability to raise interest rates.
European Central Bank policymakers are increasingly concerned about deteriorating growth prospects and there is growing momentum for a pause in rate hikes as major economic indicators come in below expectations, suggesting a recession is now a distinct possibility.
Philadelphia Federal Reserve Bank President Patrick Harker suggests that the central bank may maintain steady interest rates in September and for an extended period of time to allow previous rate hikes to continue lowering inflation.
It may be too early for the European Central Bank to pause interest rate hikes now as an early stop in the fight against inflation could result in more pain for the economy later, according to Latvian policymaker Martins Kazaks.
The contraction in euro area business activity has intensified, particularly in Germany, leading to expectations that the European Central Bank will pause its interest-rate hike campaign; US mortgage applications for home purchases have hit a three-decade low due to rising borrowing costs; South Korea's exports continue to decline, indicating lackluster global trade; Turkey's interest-rate increase has triggered a rally in the country's assets; shrinking water levels at the Panama Canal due to climate change may cause delays in restocking inventories before Christmas.
The growth in lending to euro zone companies slowed in July due to higher interest rates, signaling a potential brake on credit creation and economic growth.
The Federal Reserve meeting in September may hold the key to the end of the tightening cycle, as markets anticipate a rate hike in November, aligning with the Fed's thinking on its peak rate. However, disagreement among Fed policymakers regarding the strength of the economy and inflation raises questions about the clarity and certainty of the Fed's guidance. Market skeptics remain uncertain about the possibility of a "soft landing," with sustained economic expansion following a period of tightening.
German inflation beats forecasts, complicating the ECB's task, while US labor data eases and GDP is revised lower, causing the dollar to weaken and the euro to strengthen.
Euro zone growth is weaker than predicted, but the need for more rate hikes by the European Central Bank is not automatically voided, according to ECB board member Isabel Schnabel, who raised concerns about investors undoing the ECB's past work and the decline in real risk-free rates counteracting efforts to bring inflation back to target.
Euro zone inflation holds steady in August, but underlying price growth falls, complicating decisions for the European Central Bank as it considers a pause in rate hikes amid a slowdown in economic growth.
The euro weakened following comments from ECB rate-setter Isabel Schnabel, raising uncertainty about whether interest rates will be raised in September.
Consumer prices in the eurozone rose 5.3% on average this month compared to last year, with core inflation easing to 5.3%, potentially increasing pressure on the European Central Bank to raise interest rates.
Eurozone inflation remains at 5.3%, leading analysts to speculate that the ECB may consider pausing its interest rate hikes in light of a slowing economy.
Central banks across major developed and emerging economies took a breather in August with lower interest rate hikes amid diverging growth outlooks and inflation risks, while some countries like Brazil and China cut rates, and others including Turkey and Russia raised rates to combat currency weakness and high inflation.
The ECB expects core inflation to come down throughout the autumn as strong price increases from a year ago fall out of the data; however, energy and food prices are expected to remain bumpy, with inflation standing at 5.3% overall. The ECB emphasizes the need to contain the second-round effects of inflation and to make it clear that the current inflation episode is temporary. Additionally, the central bank does not believe that strategic price controls are the best way to fight inflation. The ECB's modeling approach is focused on assessing what is going on and using models to understand how it will play out, with the understanding that there are limitations to all models. Climate change and demographic transitions have implications for monetary policy, but the net impact on inflation is relatively contained. The ECB has managed to avoid peripheral spreads widening through its policy responses, including the pandemic emergency purchase program and pooled fiscal resourcing. In the future, short-term rates are expected to remain high for a while but come down in the later part of the decade, which helps contain spreads.
The Organisation for Economic Co-operation and Development (OECD) has stated that the European Union (EU) needs to strengthen the single market and maintain a restrictive monetary policy to address inflation and enhance the resilience of the European economy in the post-pandemic recovery. The OECD recommends that the European Central Bank (ECB) should raise interest rates to achieve its 2% inflation target, while also emphasizing the importance of protecting the single market, simplifying labor mobility, and avoiding further relaxation of state aid rules. Additionally, the OECD highlights the need for the EU to focus on green transition, combat financial crime, and accelerate the integration of electricity markets.
The European Central Bank faces a difficult decision on whether or not to hike rates as the economy slows, while the US releases inflation numbers and rising oil prices create concerns about price pressures.
The European Central Bank is expected to maintain interest rates on September 14, although nearly half of economists anticipate one more increase this year in an effort to reduce inflation.
The US dollar's strength in the foreign exchange market, along with discussions of de-dollarization, highlights the divergence between the US and other major economies. The Dollar Index is on an eight-week rally, reaching a record high in international payments, while the euro's share has declined to a record low. In the week ahead, the US CPI and the ECB meeting are expected to be major events, with the US showing signs of inflation and weaker demand, and the euro facing challenges amid stagnation and inflation. China's CPI and PPI have shown some improvement, but the focus will be on yuan loans and real sector data. The eurozone's focus will be on the possibility of a rate hike by the ECB and the release of July industrial production figures. Japan's household consumption continues to fall, and the country may experience a contraction in Q3. The UK will release employment data and GDP details, while Canada will see data on existing home sales and the CPI. Australia will release its August employment data, and Mexico's peso positions may continue to adjust due to the winding down of the currency forward hedging facility.
Euro zone government bond yields were mixed while money markets increased their bets on another rate hike by the European Central Bank, with investors split on whether the ECB will raise interest rates and money markets pricing in a higher chance of an ECB move by year-end.
The European Central Bank may raise interest rates for a 10th consecutive meeting on Thursday, but the decision is uncertain.
The European Central Bank is facing a dilemma on whether to raise its key interest rate to combat inflation or hold off due to economic deterioration, with investors split on the likelihood of a rate hike.
The European Central Bank (ECB), with its expanding responsibilities in areas such as geopolitics and climate change, faces the question of whether it knows when to stop and avoid overreaching its mandate, as it operates independently from any political or fiscal oversight.
The European Central Bank has implemented its 10th consecutive interest rate increase in an attempt to combat high inflation, although there are concerns that higher borrowing costs could lead to a recession; however, the increase may have a negative impact on consumer and business spending, particularly in the real estate market.
The European Central Bank has raised its main interest rate for the 10th consecutive time to tackle inflation, but indicated that further hikes may be paused for now, causing the euro to fall and European stocks to rally.
Bitcoin received a 2% boost as the European Central Bank hinted that its latest interest rate hike could be the last, leading analysts to question whether the ECB would tighten rates again in September.
Euro zone bonds and stocks rally as traders maintain their bets on the European Central Bank cutting interest rates next year amid concerns over economic growth.
The European Central Bank (ECB) has raised its benchmark deposit rate to 4% in an attempt to combat high inflation, despite concerns that higher borrowing costs could lead to a recession.
Traders and investors are betting that the Federal Reserve will hold interest rates steady at its September meeting, indicating a shift in the market's interpretation of good economic news, as it suggests the Fed may be close to pausing its rate hike cycle despite inflation being above target levels and potential headwinds in the economy.
The European Central Bank's decision to signal its last rate hike has further weakened the euro, causing hedge funds and speculators to anticipate potential parity with the dollar.
Following the European Central Bank's record high interest rate hike to 4%, there is speculation about how long rates will remain at this level, with analysts predicting a 12-month pause before any cuts are made, while also considering the impact of rising oil prices on inflation expectations in Europe and the US. The Federal Reserve is expected to hold rates steady in September, but there are divided opinions on whether another hike will be delivered this year, with markets anticipating rate cuts in 2024. Similarly, the Bank of England is anticipated to make one final hike in September as it assesses inflation and economic indicators.
The European Central Bank's handling of monetary policy under Christine Lagarde, including unnecessary interest rate hikes, risks pushing the Eurozone into a recession.
The Federal Reserve is expected to announce a pause on interest rate hikes due to positive economic indicators and the likelihood of a "soft landing" for the economy, but future decisions will be influenced by factors such as the resumption of student loan payments and a potential government shutdown.
The prospect of the Bank of England pausing its interest rate hikes increased as the UK's high inflation rate unexpectedly slowed to an 18-month low, causing the pound to fall and investors to see a nearly 50-50 chance of rates staying on hold at the BoE's September meeting.
Central banks around the world may have reached the peak of interest rate hikes in their effort to control inflation, as data suggests that major economies have turned a corner on price rises and core inflation is declining in the US, UK, and EU. However, central banks remain cautious and warn that rates may need to remain high for a longer duration, and that oil price rallies could lead to another spike in inflation. Overall, economists believe that the global monetary policy tightening cycle is nearing its end, with many central banks expected to cut interest rates in the coming year.
The possibility of a last hike in 2023 with the pause in interest rates in September may lead to the tightening and financial conditions that were not seen earlier when the Fed was raising rates faster.
The euro zone economy is expected to contract this quarter and remain in recession as the impact of central banks' interest rate rises hampers growth, according to a survey by HCOB's flash euro zone Composite Purchasing Managers' Index (PMI), with Germany and France experiencing significant declines in business activity.
