ECB, rate cut to avoid risk of falling behind
Analysts expect a rate cut after September's inflation figure came in below the 2 per cent target
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2' min read
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Expectations are almost unambiguous: the European Central Bank will also cut interest rates in October. The deposit rate may drop to 3.25%, the reference rate (at this stage less relevant) to 3.45%. Monetary policy will remain restrictive, but requires risk management at this stage, to avert the risk of falling too far 'behind' the inflation trend.
Inflation below target
The very surprising September surprise certainly does not draw a trend, and not only because it is isolated: it is related to energy trends. In fact, inflation fell to 1.8%, below target, while in September the introductory press conference statement continued to warn that 'inflation is expected to pick up again in the latter part of this year, not least because previous sharp falls in energy prices will no longer affect the rates calculated over the twelve months', a scenario that still cannot be ruled out.
Still wide gap between goods and services
Core inflation, however, still remains relatively high, at 2.7 per cent: if inflation of productive goods continues to be low, the difficulty of containing the speed of prices of services, which are an approximate set of the most rigid prices, is confirmed: the distance of the dynamics between the two aggregates has never been so high, and for the ECB this remains a problem (even if authoritative economists believe that it may be a pretext to keep monetary policy somewhat rigid.
