ECB Interest Rate Decision: Hawkish Pause Ahead?

September 13, 2023 22:42

Rising rates and inflation have been a problem around the world and the eurozone is not an exception. The European Central Bank’s (ECB) interest rate decision due tomorrow overshadows most financial data releases for the rest of the week.

Some economists say that Christine Lagarde and her fellow policymakers are ready to adopt a “hawkish pause” approach as previous rate hikes seem to have an effect on the euro bloc’s economy.

In the UK, GDP data published by the ONS disappointed as the UK’s economy shrank more than expected (-0.5%) in July. As a result, the British pound lost 0.3% of its value against the US dollar and 0.2% against the euro right after the report was published. Commenting on the UK GDP report, JPMorgan economists noted that “we have been arguing against the idea that the UK is entering into a proper recession dynamic on the grounds that household real incomes look set for a strong gain in 2H23, while business confidence is generally running above average. That remains the case, but the near term path for growth looks worse and we have revised down our third-quarter GDP forecast from 0.3%q/q to 0.0%.”

ECB Interest Rate Decision

The ECB’s governing board will convene on Thursday to decide on monetary policy and interest rates. Economists suggest that the bank’s policymakers will keep interest rates unchanged, pausing the monetary policy tightening to evaluate the economic conditions in the eurozone.

Commerzbank’s analysts suggest that while there are economists who forecast a rate rise, the rocky economic environment won’t allow it. In their report, they note that “in view of the weak economy and the downward trend in the inflation rate, a majority of the ECB council members will probably vote for unchanged key rates.”

US Retail Sales August Report

On Thursday, the US Census Bureau will release the August Retail Sales report is a leading indicator regarding consumer spending. Market analysts suggest that retail sales grew just by 0.2% while in July sales had risen by 0.7%. The retail sales data combined with the CPI inflation report are expected to be scrutinised by the Federal Reserve board while it prepares for its next interest rate setting meeting.

A report by Deloitte suggested that holiday sales in the United States are estimated to grow at their slowest pace in five years as shrinking household savings and worries over the economy prompt consumers to spend less. However, online shopping is forecast to grow by approximately 11% outpacing trends over the past two years.

China Retail Sales August Report

Retail sales will be a conversation topic in China on Friday as the country’s National Bureau of Statistics (NBS) is expected to publish the August Retail Sales report. The forecast suggests that retail sales rose by 2.8% in August, slightly higher than the 2.5% growth rate recorded in July.

A publication released by the People’s Bank of China (PBoC) said that the bank will pay close attention to the effect of financial policies as inflation has returned to positive territory according to the latest set of data released in August.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Miltos Skemperis
Miltos Skemperis Financial Content Writer

Miltos Skemperis’ background is in journalism and business management. He has worked as a reporter on various TV news channels and newspapers. Miltos has been working as a financial content writer for the last seven years.