ECB Could Signal a Rate Cut For September

European Central Bank (ECB) President Mario Draghi didn’t leave any doubt about his institution’s conviction to do “whatever it takes” to counter a fall in inflation expectations when he spoke at the banks annual gathering recently in Sintra, Portugal.

All instruments are on the table and can be deployed. That was the message. The question now is: Will anything happen as early as this week?

Expectations are divided as to whether the ECB wants to pre-empt a policy move by the U.S. Federal Reserve that pushes down the dollar and strengthens the euro as this would hurt euro zone exporters and weigh on inflation further.

Traditional ECB watchers though expect a change in the central bank’s forward guidance at this month’s meeting on Thursday and then potential action on interest rates at its meeting in September.

“In response to the weak growth and still subdued inflation, the ECB will likely adjust its guidance in July and vow to keep rates at ‘present or lower’ rather than just at ‘present’ levels,” said Florian Hense, an economist with Berenberg, in a research note earlier this month.


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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza