xCorsarz
Poland
about a year ago
### ECB to Lower Rates, but What Next? Will the Euro Decline? The upcoming decision by the European Central Bank (ECB) is not expected to significantly affect the euro's exchange rate against the dollar. Next week, the ECB is likely to cut interest rates by 25 basis points. This decision comes despite recent poor inflation data and stronger growth in negotiated wages. At this point, it will be challenging for European policymakers to backtrack on their declaration of easing monetary conditions at the June meeting. However, last week's publications may influence the pace and scale of further rate cuts. #### The Initial Rate Cut is Almost Certain Market pricing and recent statements from ECB Governing Council members, even those from the hawkish camp, suggest that the first reduction in the cost of money in the eurozone is nearly certain. However, the market will not receive further guidance on how the entire cycle will proceed. It is likely that the ECB will reiterate the familiar stance that future decisions will depend on incoming data. This approach prevents the ECB from committing to a specific path for interest rates. #### Challenges for Further Cuts in July The dovish camp may face difficulties in pushing through another cut as early as July. Inflation in the eurozone has not decreased for two months. In May, it even rose from 2.4% to 2.6%, and the core inflation rate halted its downward trend, increasing from 2.7% to 2.9%.
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