: European Central Bank pauses as inflation drops ‘markedly’

The European Central Bank on Thursday paused on interest rates, after data showing inflation slowing down as worries about the economy abound.

President Christine Lagarde used variants of the word “weak” nine times in her opening comment, delivered from Athens, Greece, after the ECB held its deposit rate at 4%, its first pause since the summer of 2022. “The euro area economy remains weak,” Lagarde said.

She pointed to falling manufacturing output, a weakening service sector, the impetus from reopening after COVID lockdowns fading, and the broadening impact from past interest-rate hikes.

Even as she hailed inflation falling “markedly” to 4.3% year-over-year in September, Lagarde told a reporter it would be “absolutely premature to discuss cutting interest rates,” which she said was not debated by the governing council.

The euro
EURUSD,

was slightly weaker after the ECB decision, which coincided with a separate report showing the U.S. economy growing at an annualized 4.9% rate in the third quarter. The yield on the 2-year German bund
BX:TMBMKDE-02Y
fell 3 basis points to 3.10%.

Gurpreet Gill, a macro strategist at Goldman Sachs Asset Management, said the ECB hiking cycle is complete, and that it’s expecting a cut in the third quarter of next year.

source

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