(Bloomberg) -- The European Central Bank is set to lower interest rates for a fifth meeting as inflation that’s nearing the 2% target lets officials further loosen the shackles on the economy.
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Analysts polled by Bloomberg are unanimous in predicting a quarter-point reduction in the deposit rate, to 2.75%, on Thursday. A majority doesn’t expect President Christine Lagarde to formally commit to future moves, even as many of her Governing Council colleagues have flagged that another cut will probably follow in March.
The hope is that easing monetary policy will breathe life into an economy finding it hard to grow, particularly as political friction unsettles consumers and businesses in the euro zone’s two biggest member-states.
The push comes despite the Federal Reserve being less eager to trim borrowing costs. Both central banks fret about US President Donald Trump’s economic plans, with ECB policymakers balancing warnings that greater global trade stress could damp exports against lingering fears over services prices still rising at twice the 2% goal.
A rate cut this week “should be an easy decision for the Governing Council, as would another one in March,” said Evelyn Herrmann, European economist at BofA Global Research. “After that, things could get more interesting and possibly more controversial.”
The ECB will announce its decision at 2:15 p.m. in Frankfurt. Lagarde will host a press conference 30 minutes later.
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Interest Rates
Economists surveyed by Bloomberg still anticipate cuts at each of the ECB’s policy four meetings through June. Traders, however, have pared bets and are barely pricing three reductions in the first half, with a possible pause in April. Beyond that, they see a two-thirds chance of another step by year-end.
Officials have expressed diverging views on how far they’re willing to go, suggesting tensions may soon intensify. Doves including Greece’s Yannis Stournaras and France’s Francois Villeroy de Galhau are prepared to take the deposit rate to 2% by June — a scenario hawks like the Netherlands’s Klaas Knot aren’t currently willing to embrace.
Lagarde herself has largely stayed out of the debate.
“I leave it to them to sort of anticipate and play that game of so many at which pace,” she told CNBC last week in Davos. “My job as president of the ECB is to make sure that we apply the methodology properly, that we project as well as we can, that we take into account empirical data as well, that we use our judgment and we have to be very attentive to the rest of the world.”