Standard Chartered's Global Research team has assessed the outlook for Euro area monetary policy, highlighting that the probability of a European Central Bank (ECB) rate hike in October is limited. The analysis points to core inflation, which has only increased slightly from 2.2% year-on-year in January to 2.5% in September, as a key factor in this assessment [1]. Additionally, the team notes that ECB President Christine Lagarde has emphasized the downside risks to both growth and inflation stemming from higher yields [1].
Given these considerations, Standard Chartered believes that the likelihood of an October rate hike is low. The research further suggests that the ECB Governing Council is likely to wait for the release of new macroeconomic projections, which are scheduled to accompany the December policy meeting, before making any changes to policy rates [1].
No immediate market reactions or analyst opinions beyond Standard Chartered's outlook are discussed in the article. The focus remains on the cautious approach of the ECB in light of modest inflation dynamics and concerns about the impact of higher yields on the Euro area economy [1].
CONCLUSION
Standard Chartered expects the ECB to hold off on a rate hike in October due to only modest increases in core inflation and concerns about downside risks from higher yields. The Governing Council is anticipated to wait for new macroeconomic projections in December before considering any policy changes.