The European Central Bank is expected to stand pat next week, with the market closely watching economic projections and interest rate hike signals.
BlockBeats News, December 14th. An analysis by the Financial Times pointed out that, given European Central Bank President Lagarde's view that the bank is in a "good place," investors unanimously expect the ECB to keep the benchmark interest rate at 2% next week and instead focus on its economic forecasts. Lagarde stated this week that rate-setters may raise their growth forecasts for the eurozone again at the meeting. These stronger growth forecasts, along with sustained inflation, have recently prompted traders to increase bets on an ECB rate hike next year.
However, as there is still controversy over a potential shift in the monetary policy direction, and the shift in pricing in the forward market has only occurred in recent weeks, traders will pay close attention to clues about the timing of rate hikes. Any adjustment in policy signals is expected to be subtle. George Mollard, Eurozone economist at Royal Bank of Canada Capital Markets, said he does not expect the ECB to raise rates in 2026 because "the cyclical tailwind may be temporary." He added that the ECB has "clearly stated that it does not want to overreact to temporary deviations from its target." (FXStreet)
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