ECB To Hold Rates Again But Keep Door Ajar To Further Easing

Central Bank

Economic

Summary:

The European Central Bank is set to leave interest rates unchanged on Thursday as inflation remains in line with its target, but a fraught trade and political outlook means it will keep alive the prospect of further easing.

Key points:

● Deposit rate to remain at 2%

● Debate over more easing to simmer for months

● Economy holding up but tariffs impact not yet fully felt

● Decision at 1215 GMT, Lagarde press conference at 1245 GMT

The ECB halved its key rate to 2% in the year to June but has been on hold ever since, arguing that the 20-country euro zone economy is in a "good place", even if more easing cannot be ruled out.

Data over the summer has only confirmed this sanguine view, giving policymakers time to understand how U.S. tariffs, higher German government spending and political turmoil in France might impact growth and inflation.

This makes it likely that ECB President Christine Lagarde will once again aim to be "deliberately uninformative" about the future path of interest rates - as in July, when she batted back every question on the way forward.

But Lagarde is unlikely to close the door on further rate cuts, especially since inflation is projected to dip below the ECB's 2% target next year, keeping alive market bets that a final "insurance" cut could come around the turn of the year.

"While officially the Governing Council sees inflation risks as broadly balanced over the medium term, most members probably still regard downside risks as somewhat more prominent," UniCredit analysts said in a note.

"The ECB will probably leave the door open for a further rate reduction if downside risks were to intensify."

In any case, the debate is at the margins and focuses on just a single rate cut, indicating that the ECB is done with the bulk of changes to monetary policy and rates are likely to stay around this level for an extended period.

The ECB will announce its decision at 1215 GMT, followed by Lagarde's 1245 GMT news conference.

RISKS

The key debate will be around how policymakers see risks.

Hawkish Governing Council members, who are opposed to further easing, say the euro zone economy has been unexpectedly resilient to trade tensions and that growth is well supported by buoyant private consumption.

They point to rebounding industrial production and a surge in German government spending to argue that growth will remain on a moderately upward path.

Although U.S. President Donald Trump's 15% tariffs on European Union imports are higher than predicted, firms are showing adaptability and the certainty of having agreed a deal offsets some of the negatives.

"We think the ECB's easing cycle has ended," UBS economist Reinhard Cluse said. "We think the ECB will not cut rates further in light of the sizeable fiscal stimulus targeting defence and infrastructure, which is likely to be increasingly visible from early 2026."

But policy doves say that tariffs have yet to fully work their way through the economy and could dampen an already low growth rate, reversing the rise in consumption.

This could then weigh on prices next year, just when inflation is seen dipping below target, raising the risk that firms will change their pricing and wage-setting, thus entrenching anaemic price growth, much like before the pandemic.

The U.S. Federal Reserve's looming rate cuts are meanwhile likely to help the euro firm against the dollar, putting downward pressure on prices.

"What we have seen since June, to us, will reinforce disinflationary forces," Bank of America said. "An economy with a negative output gap, below-trend growth, and an inflation undershoot that is about to start and will likely become persistent, calls for some stimulus."

A fresh bout of political chaos in Paris, which has pushed French bond yields sharply higher, is another headache for the euro zone's central bank.

It has tools to intervene, but only for an "unwarranted and disorderly" rise in borrowing costs, which economists say is clearly not the case now, given France's high debt and feeble economic growth.

Source: Reuters

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James Whitman

Central Bank

Economic

Emerging markets are becoming more attractive as the prospect of an upcoming US rate cut — combined with softer local inflation and relatively low public debt — strengthens the investment case, according to Navin Hingorani, Singapore-based portfolio manager at Eastspring Investments.

“Emerging markets are trading at a 65% discount to the US, so we’re seeing opportunities across different markets, across different sectors,” Hingorani said in an interview, adding he’s looking for opportunities in the Philippines, Indonesia and South Korea, as well as Latin America.

“One of the key things is real rates are still very high across emerging markets — they’re as high as they’ve been since the financial crisis,” he added. “As the US moves into a rate-cutting cycle, that will be very positive for emerging markets.”

The Federal Reserve is widely expected next week to ease monetary policy for the first time this year, after data showed US jobs growth cooled notably in August and unemployment climbed to the highest since 2021.

Hingorani also pointed to increasing political instability in the developed world from Japan to the US and France, exacerbated by skyrocketing public debt.

As a long-term investor, Hingorani said, he can look through the recent unrest in Indonesia, which was rattled by its worst unrest in years and the sudden departure of Finance Minister Sri Mulyani Indrawati.

“We do not react to short-term market events until we understand the event’s longer-term implications,” he said. “There is therefore no change to our view or allocation at present.”

He recalls delegates at an investment forum in Chile last year were asked to sum up “emerging markets” in a poll. “Political risk” dominated the response, reflecting unease ahead of a packed election calendar across Indonesia to South Africa, Mexico and India.

Fast forward to now: Hingorani says the narrative has flipped. Politics is increasingly becoming a fresh source of risk in the developed world, as debt piles strain budgets and political demands, particularly those of President Donald Trump, threaten central bank independence.

That’s also being reflected in asset price performance. Yields on 30-year government debt for advanced economies, as of Friday, have jumped an average 16 basis points over the past month, a sign of growing investor angst, compared with about 4 basis points for developing nations. Equities tell a similar story, with emerging-market stocks outperforming US shares this year for the first time since 2017, after eking out a meager 5% return last year.

Gross debt as a share of annual economic output in developing markets is forecast to average around 75% this year compared with roughly 125% for the Group of Seven developed countries, according to the International Monetary Fund. For Indonesia, the figure is around 40%, while in Vietnam it’s just 33% — all well below the anxiety-driving levels in parts of the developed world.

That fiscal prudence is reinforced by inflation that’s either low or falling, and by ample foreign-exchange reserves that give central banks room to smooth volatility. Emerging market outperformance has made his conversations with clients and prospects “a little bit easier” in recent weeks, he added.

“There’s this realization that the perception that emerging markets tend to be riskier may not be warranted,” Hingorani said.

Source: Bloomberg

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Manuel

Central Bank

Political

President Donald Trump's goal of appointing a majority of the Federal Reserve's board of governors faced a setback late Tuesday when a court blocked his unprecedented attempt to fire Lisa Cook.

But the very next next day, his nominee to replace another Fed governor moved forward, giving him one more opportunity during his second term to reshape the Fed.

Over time, Trump will almost certainly get the lower short-term interest rate he is seeking, economists say, although it's unlikely the Fed will shave 3 percentage points from its current level of about 4.3%, as he has demanded, even if he gets most of the seats on the seven-member board.

On Wednesday, Trump got one step closer to reaching a majority when the Senate Banking Committee approved the president's nomination of Stephen Miran, one of his top economic advisers, to an open position on the Fed's board. The full Senate is expected to approve Miran shortly. He could end up participating in the central bank's policy meeting next week, when it is expected to reduce its key interest rate by a quarter-point to about 4.1%.

But he took a step back with Cook after a federal court blocked Trump's attempt to fire her late Tuesday. Jia Cobb, a judge appointed by former president Joe Biden, ruled that the firing was illegal because the administration did not provide sufficient cause to remove her. That means Cook is also likely to participate in next week's Fed meeting.

The Trump administration appealed that ruling Wednesday, and many observers expect the case could end up at the Supreme Court.

Here are where things stand regarding Trump, the Federal Reserve, and its traditional independence.

Trump's ability to fire Cook

Fed governors aren't like Cabinet members or other officials who serve at the pleasure of the president. Under the law governing the Fed, they can't be fired over policy disagreements, but can be dismissed “for cause.”

Trump has accused Cook of committing mortgage fraud when she bought two properties in 2021 —before she joined the Fed — which she said were both “primary residences.” Such a designation can result in lower down payments and mortgage rates than if one of the homes was classified as a rental or second house.

On Tuesday, Cobb ruled that Fed governors can only be fired for malfeasance or other actions while in office and said the White House also failed to provide Cook with a chance to formally respond to charges against her.

The appeals court or the Supreme Court could stay the district court's decision, which would remove Cook from the Fed's board until her case is resolved. The Supreme Court has shown sympathy for Trump's arguments that the president can remove many officials from agencies previously seen as independent. But in a case earlier this year, the Supreme Court said that the central bank is a “unique, semi-private entity” and suggested its officials may have greater protection from being removed by the White House.

Miran's appointment raises concerns over Fed independence

Trump picked Miran to replace former Fed governor Adriana Kugler, who stepped down Aug. 1. Miran would, if approved, simply finish her term, which expires in January.

Miran has taken the unusual step of planning to keep his job as the chair of the White House's Council of Economic Advises if he does win Senate approval. While previous presidents have appointed their aides to the Fed, they have always then stepped down from White House jobs.

Nearly all economists and most Wall Street investors prefer a Fed that is independent from day-to-day politics. They worry that if the Fed falls under the control of the White House, it will keep its key interest rate lower than justified by economic fundamentals to satisfy Trump’s demands for cheaper borrowing.

That could accelerate inflation and over time could also push up longer-term interest rates, such as those on mortgages and car loans. Investors may demand a higher yield to own bonds to offset greater inflation in the future, lifting borrowing costs for the U.S. government and the entire economy.

Where things currently stand with the Fed

If Miran is confirmed, he will be the third Trump appointee to the Fed's seven-member board, after Trump appointed Christopher Waller and Michelle Bowman in his first term. If Cook is able to keep her seat, then Trump's next opportunity would arrive in May, when current Fed Chair Jerome Powell's term ends.

It's possible that Powell could pull an unusual move and remain on the Fed's board even after stepping down as chair. If so, that would deprive Trump of another appointment and would force him to choose a new chair from the existing seven governors.

Powell has declined to answer when he has been asked whether he will leave the board after his term as chair ends. But if he does leave, then Trump could appoint a fourth member and gain a majority.

The four other governors are serving terms that last beyond the end of Trump's time in office. Governors are appointed to 14-year terms, in part to shield them from political pressure.

Still, many governors step down before their terms end, so Trump may have more opportunities to add loyalists to the board.

“Over time the composition of the Fed aligns with the views of the administration because you pick like-minded people,” said Vincent Reinhart, chief economist at BNY, a bank. “The direction of travel is for lower rates.”

Source: AP

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Manuel

Cryptocurrency

Political

President Trump’s CFTC chair nominee Brian Quintenz alleged that Tyler Winklevoss attempted to derail his confirmation after Quintenz refused to promise favorable treatment regarding the exchange’s past litigation with the commission.

According to private text messages released by Quintenz on Sept. 10, Winklevoss shared Gemini’s 13-page complaint against the CFTC Inspector General in a July 2025 exchange.

He claimed the agency pursued “dubious false statements charges” and “selectively and unfairly weaponized” enforcement against the company.

Winklevoss described seven years of “lawfare trophy hunting” by the commission in the leaked messages.

Transparency claims

Winklevoss questioned why the CFTC sued Gemini rather than “parties that defrauded us of $10mil” or CBOE. He also questioned why the commission continued pursuing Gemini “after it knew its investigation was started based on a false whistleblower.”

Quintenz consistently refused to make specific commitments, stating that “any decision or response to your complaint should be made by and given the full weight of the confirmed chair.”

He committed only to addressing matters “fully and fairly if and when I am confirmed,” while emphasizing the importance of proper process.

Winklevoss then expressed disappointment that Quintenz hadn’t reviewed their complaint despite previous discussions.

Additionally, the Gemini co-founder stressed that “cultural reform, which includes rectifying what happened to us, should be the highest priority” and urged Quintenz to align with President Donald Trump’s mandate to end regulatory warfare.

Quintenz explained his approach of waiting for confirmation before forming judgments. He added that he decided “to wait until I can get into the role to get that view as opposed to trying to get it now through current leadership.”

He described having “a very poor experience with that on every important issue or decision so far” when dealing with existing commission staff.

The message release comes two days before Gemini’s planned IPO on Sept. 12.

Quintenz claimed that Winklevoss contacted Trump in an effort to pause his confirmation for undisclosed reasons following their exchange.

He added that he disclosed the discussions with Winklevoss to protect the President from misinformation and demonstrate his commitment to transparency over personal advancement.

Source: Cryptoslate

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Manuel

Economic

Stocks

US stocks mostly edged higher on Wednesday as Oracle's (ORCL) blowout revenue forecast lifted AI hopes, as its shares had their best day in over three decades. Meanwhile, wholesale inflation unexpectedly declined last month, bolstering the case for the Federal Reserve to cut rates next week.

The S&P 500 (^GSPC) climbed 0.3% to notch a fresh record, while the Nasdaq Composite (^IXIC) also closed above the flatline to eke out its own record. The Dow Jones Industrial Average (^DJI), which includes fewer tech stocks, fell 0.5% from its record high.

Oracle stunned Wall Street as its CEO said its cloud revenue will skyrocket thanks to a big jump in bookings from the "who's who of AI." Its shares ended the day over 36% higher, amid optimism that the AI infrastructure build-out — seen as fueling stock gains — is finally picking up pace.

Elsewhere, a reading on wholesale inflation came in much cooler than expected, showing producer prices actually declined on a month-over-month basis vs. expectations for a 0.3% increase. Year over year, the Producer Price Index is up 2.6%, also lower than expectations for 3.3%. The data sets the stage for the Consumer Price Index (CPI) release on Thursday, the last clue to price pressures before the Fed's policy meeting next week.

Markets have been more focused on labor market data, however, to gauge the Fed's next move. A revision to US job numbers on Tuesday confirmed weakness in that market, cementing the conviction that a September rate cut is coming and stoking a rally in stocks.

Fed governor Lisa Cook is likely to take part in that Fed rate decision next week, after a judge blocked President Trump from removing her amid allegations of mortgage fraud. Trump has targeted Cook in pursuit of lower interest rates.

On the trade front, Trump has urged the EU to join the US in imposing new 100% tariffs on India and China, media reports said. The tariff hikes are meant to push Russia — President Putin in particular — to participate in talks on the Ukraine war. Tensions in the region are rising after NATO member Poland shot down Russian drones that entered its airspace.

Source: Yahoo Finance

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Manuel

Cryptocurrency

Ethena’s synthetic stablecoin, USDe, has climbed to over $13 billion in circulation less than a day after it was listed on Binance.

DeFiLlama data shows supply jumped nearly 2% in 24 hours to about $13.2 billion, making it the fastest-growing stablecoin in the past day.

This rapid expansion has been ongoing over the past month, with the protocol adding more than $3 billion to its footprint after it crossed $10 billion in August. Notably, USDe is the third-largest stablecoin in the industry, controlling around 5% of the $287 billion stablecoin market.

Meanwhile, the timing of this growth reflects several reinforcing factors designed to boost the stablecoin’s growth.

Over the past months, market interest in stablecoins has accelerated after President Donald Trump signed the GENIUS Act, the first federal law providing a framework for these assets.

That regulatory clarity, coupled with Ethena’s significant yields of around 10%, has drawn capital from investors who see DeFi returns as more attractive than US Treasurys.

Binance’s integration offers USDe $4B opportunity

This milestone comes as Binance added USDe to its platform this week.

Guy Young, Ethena Labs’ founder, said the listing highlights Binance’s rare decision to back an external project after extensive due diligence.

He described the integration as a turning point, with Binance’s $130 billion in assets and $40 billion in stablecoins offering a massive distribution channel. Ethena´s USDe Stablecoin Surges to Over $13B After Binance Listing_1

Ethena´s USDe Stablecoin Surges to Over $13B After Binance Listing_1

Considering this, Young said he expects USDe adoption on Binance to eventually mirror its penetration on Bybit, where it accounts for around 12% of total dollar balances.

According to him: “USDe penetration for USD assets on other CEXs sits at roughly ~12% which would correspond to >$4.0 billion of USDe on Binance.”

According to the announcement, the token will be paired against Tether’s USDT and integrated into Binance Earn, allowing users to collect weekly dollar-denominated rewards for simply holding USDe on the exchange.

Later this month, it will be accepted as collateral across Binance’s futures and perpetual markets.

Source: Cryptoslate

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Manuel

Economic

Political

Mexico said on Wednesday it will raise tariffs on automobiles from China and other Asian countries to 50%, in a broad overhaul of import levies the government said would protect jobs and analysts said was aimed at placating the United States.

The Economy Ministry said the moves, which will increase tariffs to varying degrees on goods across multiple sectors including textiles, steel and automotive, would impact $52 billion of imports.

"They already have tariffs," Economy Minister Marcelo Ebrard told reporters when asked about the import levies on Chinese cars, which are currently 20%. "What we will do is raise them to the maximum level allowed."

"Without a certain level of protection, you almost can't compete," he added.

Ebrard said the measures, which come just within limits imposed by the World Trade Organization, were intended to protect jobs in Mexico as Chinese cars were entering the local market "below what we call reference prices."

The plan still needs to be approved by Congress, where the government holds a significant majority.

The tariffs will impact countries that do not have trade deals with Mexico, especially China, South Korea, India, Indonesia, Russia, Thailand and Turkey, the Economy Ministry said in a document about the plan.

The move comes as the United States pushes countries in Latin America to limit their economic ties with China, with which it competes for influence in the region.

Ebrard had earlier this year spoken against tariff measures, saying they were at odds with economic growth and keeping inflation down.

RESPONDING TO U.S. PRESSURE

Banco BASE analyst Gabriela Siller said the tariffs would likely boost demand for Chinese vehicles in the very short-term.

"Tariffs on countries with which Mexico does not have trade agreements have two objectives," she said on social media. "First, more revenue and second, to look good to Trump."

John Price, managing director at Americas Market Intelligence, said that Mexico, which exports many of its own vehicles to the U.S., is responding to U.S. pressure while trying to protect its economy.

"The Mexicans are trying to placate the Americans, but protect their industrial policy that's worked so well for them over the last 30 years," he said after the government announced it was looking to raise an additional $3.76 billion in tariff measures next year.

The United States and Mexico, which share a free trade agreement along with Canada, are each other's top trade partners. The agreement, which has spared Mexico the brunt of much of the tariffs from U.S. President Donald Trump's administration, is set for review next year.

Following reports last month that Mexico could raise tariffs on Chinese goods, Chinese Foreign Ministry spokesperson Guo Jiakun said China opposed restrictions made "under the coercion of others" and that it believed countries would "remain independent."