MNI ECB Review - October 2023: Pausing Amid Uncertainty

MNI ECB Review - October 2023: Pausing Amid Uncertainty

The ECB made no changes to monetary policy or forward guidance, as widely expected. President Lagarde stressed during the press conference that the decision was taking unanimously, suggesting that the apparent divergence of views at the September meeting has narrowed. There were, however, some dovish signals during the press conference. Despite a raft of pre-meeting commentary from various policymakers indicating a desire to begin discussing balance sheet policies, Lagarde indicated that reinvestments under PEPP did not come up at all this time around. While somewhat of a surprise for markets, this admission should be considered alongside the recent emergence of geopolitical risks, rising bond yields and subdued economic growth.

Lagarde also indicated that inflationary developments were broadly in line with expectations, but that risks to economic growth were tilted to the downside. Finally, when confronted with a question on rate cuts, Lagarde firmly pushed back and stressed that it was too premature to begin such debates. All-in-all, this would suggest that the ECB is comfortable with pausing at this juncture, that the impetus for hiking rates further has subsided and that the tightening cycle has likely peaked.

For the full publication please see:

ECB Review October 2023.pdf