ECB seen on hold for third meeting as exports soften
The ECB is expected to leave rates unchanged at its meeting in Frankfurt on Thursday for a third straight meeting, with inflation near target and trade frictions pressuring the outlook.
Officials have signaled satisfaction with current policy as inflation nears target and growth stays modest, though redirected Chinese exports and new trade frictions weigh on demand.
The Governing Council cut rates by a total of two percentage points through June before pausing. A Bloomberg survey of 88 economists shows no change expected this month. Policymakers continue to stress that decisions depend on incoming data and that small deviations from the inflation goal can be tolerated for some time.
Market pricing now implies roughly even odds of one more rate cut by June next year, though few expect the next move to be an increase. The ECB’s tolerance for short-term undershoots will be tested in December, when new staff projections are released, including the first outlook for 2028.
Recent data paint a mixed picture. Services activity has strengthened and business confidence has improved, particularly in Germany. But manufacturing remains weak, eurozone exports to the United States have dropped sharply, and reports suggest an influx of Chinese goods into Europe. Oil supply remains ample despite new U.S. sanctions on Russian producers.
“The burden of proof remains on data to deteriorate to justify further cuts,” said BNP Paribas, adding that “the bar for additional rate reductions is relatively high,” even as some officials keep a risk-management cut on the table.
- ECB Chief Economist Philip Lane argued that the risk of inflation staying below target for too long could justify a “slightly lower” rate.
- UniCredit warned that missing the goal over the medium term is possible given tariffs, a weaker labor market, and diverted Chinese trade.
- Felix Schmidt at Berenberg highlighted support from a stable jobs market, a resilient services sector, and German fiscal stimulus.
Market pricing now implies roughly even odds of one more rate cut by June next year, though few expect the next move to be an increase. The ECB’s tolerance for short-term undershoots will be tested in December, when new staff projections are released, including the first outlook for 2028.
As GNсrypto previously reported, economists expect the deposit rate to stay at 2% at the Oct. 30 meeting and remain there through 2026, after being raised from −0.5% to 4.0% in 2022–2023 and then lowered to 2% in 2025. Officials see current financial conditions as appropriate, with inflation near target and growth stable, though risks persist from energy prices, logistics bottlenecks, weakness in Germany and France, and fiscal outcomes.
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