Connect with us

Hi, what are you looking for?

Alive Business PlanAlive Business Plan

Investing

ECB divided on risk of excessively weak inflation, accounts show

FRANKFURT (Reuters) – A European Central Bank rate cut last month was seen as an insurance move against unexpectedly low inflation but policymakers appear divided on the risk of excessively low price growth, the accounts of their Oct 16-17 meeting showed on Thursday.

The ECB cut rates for the third time this year in October and made clear that further easing is coming given a weak economy and diminishing price pressures, even if the timing and size of policy moves remained open.

“Acting now could provide insurance against downside risks that could lead to an undershooting of the target further ahead and would support a soft landing,” the ECB said, acknowledging that only limited new information was available.

If these few indicators were a blip and misled expectations about weak inflation, the bank could then simply avoid a rate cut in December, the accounts suggested.

“If the slowdown signalled by indicators of economic activity and the downside surprise to inflation proved to be temporary, a decision to cut rates now could, ex post, turn out as merely having brought forward a December cut,” the ECB added.

However, the accounts also seemed to reveal disagreement over just how weak price pressures may be.

Policymakers were in agreement that inflation would hit 2% earlier than previous projections for the end of 2025 but there were different views on what came after.

One group seemed to argue that undershooting the target was not on the cards.

“Such a scenario of undershooting probably required a combination of factors that were not yet present,” the accounts said.

“These included disappointing economic growth that moved into recessionary territory, a weakening in the financial system, wage pressures fading away and a downward shift in inflation expectations.”

But there was another group who thought the problem was deeper and the ECB was at risk of going below its target, an outcome the bank considers as undesirable as overshooting.

“By contrast, it was also suggested that the change in the inflation outlook had been more significant,” the accounts said.

They argued that downside inflation surprises and rapid changes in market expectations pointed to an increasing risk of undershooting the target, possibly in a sustained manner.

“This could now be seen as a greater risk than overshooting the target,” they said.

This post appeared first on investing.com
Become a VIP member by signing up for our newsletter. Enjoy exclusive content, early access to sales, and special offers just for you! As a VIP, you'll receive personalized updates, loyalty rewards, and invitations to private events. Elevate your experience and join our exclusive community today!

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    You May Also Like

    Latest News

    The Gateway Pundit, a far-right website, published a note from its editor on Saturday acknowledging that two election workers in Georgia did not engage...

    Latest News

    New majorities in Congress, particularly when the incoming party has a new leader, offer the rare chance for the institution to take a breath...

    Latest News

    Sister Stephanie Schmidt had a hunch about what her fellow nuns would discuss over dinner at their Erie, Pennsylvania, monastery on Wednesday night. The...

    Investing

    JAKARTA (Reuters) -Indonesia has asked Alphabet (NASDAQ:GOOGL)’s Google and Apple (NASDAQ:AAPL) to block Chinese fast fashion e-commerce firm Temu in their application stores in...



    Disclaimer: alivebusinessplan.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.


    Copyright © 2024 alivebusinessplan.com