ECB to adopt 'less aggressive' rate easing approach as GDP reveals bounce-back
|The Euro has received a welcome boost from this week’s surprisingly strong Euro Area economic figures.
The latest GDP report showed an encouraging bounce in activity in Q3, with the bloc’s economy unexpectedly posting its fastest pace of expansion in two years in the three months to September.
Inflation also rebounded off its more than three-year lows in October, even if partly a byproduct of the base effect, now that last year’s drop in energy prices is no longer taken into account in the calculation.
We think that the news may incentivise the European Central Bank to adopt a less aggressive approach to lower rates at its upcoming policy meetings.
Any lingering speculation surrounding the slim possibility of a giant-sized 50 basis point cut from the ECB in December is likely to be well and truly silenced. Another ‘standard’ 25bp move still looks firmly on the cards for the next meeting, but the ECB may be reluctant to sound overly dovish in its upcoming communications, instead opting for an approach that relies solely on data-dependence.
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