​Following the European Central Bank’s (ECB) interest rate hike in September, financial markets were still placing some weight on a scenario whereby there could be a further increase in the current cycle. Recent ECB communication has emphasised the data-dependent nature of its current approach to setting interest rate policy. Following this, the ECB can perhaps shift the interest rate gear stick into reverse after a historically aggressive tightening cycle. In this context, the path to lower inflation – and hence to lower interest rates – may not be smooth. Notwithstanding these and other uncertainties, the latest evidence provides a reasonable basis to expect that ECB rates have now peaked and may start to come down sooner, and by more than previously thought.

Source: Irish Independent November 06, 2023 08:52 UTC