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signs of economic progress Europe will probably let go European Central Bank Keep interest rates unchanged for the fourth consecutive meeting on Thursday.
chairman Christine Lagarde Monetary policy remains “in a good position” with the benchmark deposit rate at 2%, it said in recent meetings. Analysts expect that language or something similar to be repeated in his press conference following the bank’s rate-setting council decision.
The bank had last cut rates in the June meeting.
The survey of purchasing managers by S&P Global showed a slight decline for December but still sees an increase in business activity through the end of the year, boosting expectations that the 20 countries that use the euro currency will see growth of about 0.3% per quarter compared with the previous quarter, said Adrian Pretjohn, Europe economist at Capital Economics.
The outcome is better than feared during turbulent trade talks with the United States over the summer, which ultimately settled with a 15% tariff or import tax imposed on European goods by the US President. donald trump,
This is not good for European exporters. But Trump’s threat of higher rates and the deal struck with the EU’s executive Commission have removed uncertainty and made the decision easier for businesses.
Analysts say the cuts could keep the economy running even without additional stimulus.
“The fog of economic uncertainty has lifted somewhat, especially with respect to trade,” economist Lorenzo Codogno said. “This will give the Governing Council confidence that it is in ‘good standing’, which is likely to eliminate any remaining intuitive bias towards a rate cut.
Moreover, inflation pressures are still too high for the ECB to consider a cut.
The headline rate of 2.1% for annual inflation in November is broadly in line with the Bank’s 2% target due to a decline in volatile energy prices. But inflation was higher at 3.5% in the services sector, which comprises much of the economy, from hairdressers and hotels to concert tickets and medical services.
Central bank rate cuts can support growth as they strongly influence lending rates throughout the economy, reducing credit costs and promoting credit sensitive purchases such as new homes by consumers or new production facilities by businesses. Higher rates have the opposite effect and are used to control inflation by reducing the demand for goods.