“The recent increase in negative growth risks in the euro area has reinforced the case for a rate cut at the next ECB monetary policy meeting in September, provided that disinflation is indeed on track,” Rehn said in a speech to the European American Chamber of Commerce in New York.
Markets see a 90% chance of a 25 bps cut in the deposit rate to 3.5% in September and see at least one more move before the end of the year.
Rehn argued that the long expected pick up in the euro zone’s economy was not a given and policymakers should be prepared for different outcomes.
“The bad news relates to the growth outlook: there are no clear signs of a pick-up in the manufacturing sector,” Rehn said. “We must also consider that the slowdown in industrial production may not be as temporary as assumed.”
Source: REUTER
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