The global march towards lower interest rates reaches Europe this week with the ...
BRUSSELS - The global march towards lower interest rates reaches Europe this week with the European Central Bank expected at least to signal easier monetary policy, while Turkey’s new banking chief is seen taking an ax to the country’s rates.
Two-thirds of economists polled by Reuters expect the ECB next week simply to change its guidance, such as for rates to be at “present or lower levels” ahead, with a cut of the deposit rate to an all-time low of -0.50% at its September meeting. If the Fed starts cutting rates and the ECB does not send out an extremely dovish message, the euro could strengthen, although at Friday’s level of $1.12 it is hardly near the pain barrier for EU exporters.“Maybe they want to prevent an appreciation and, like the U.S., they want to prolong the upswing. The data though is not as bad as you might think,” said economist Bernd Weidensteiner.
Yet markets were by Thursday expecting a half percentage point cut in U.S. rates at the end of July, double the reduction they expected just a day earlier. The action has been sold as insurance against any negative development. U.S. economic growth is expected to have cooled in the second quarter, set to be confirmed in a first GDP estimate on Friday.In Turkey, the case for action is more clear-cut given a recession-hit economy.
The headquarters of the European Central Bank and the skyline with its financial district are seen in the early evening in Frankfurt, Germany, September 30, 2018. REUTERS/Kai Pfaffenbach
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