Surprise Drop In PPI Strengthens Case For September Fed Rate Cut

Summary:

Wholesale prices unexpectedly fell 0.1% in August, adding weight to growing expectations that the Federal Reserve will approve a rate cut in its upcoming policy meeting.

Wholesale prices unexpectedly fell 0.1% in August, adding weight to growing expectations that the Federal Reserve will approve a rate cut in its upcoming policy meeting. The latest Producer Price Index (PPI) report from the Bureau of Labor Statistics came in well below the 0.3% increase forecasted by economists, offering the central bank a stronger justification for easing its policy stance. Core PPI, excluding food and energy, also dropped 0.1%, versus an expected 0.3% rise.

Markets quickly responded. Futures on the S&P 500 advanced following the softer inflation data, while Treasury yields dipped modestly. The benchmark 10-year Treasury yield declined to 4.068%, and the 2-year yield dropped 1 basis point to 3.529%, reflecting expectations of a dovish shift by the Fed. According to CME FedWatch, traders are now fully pricing in a rate cut in September.

Service Sector Weakness Bolsters Dovish Case

A key driver of the weaker PPI was a 0.2% decline in services prices, with trade services down 1.7%. Notably, margins for machinery and vehicle wholesaling fell 3.9%. These sectors are closely monitored by the Fed for insights into broader pricing pressures and monetary policy impacts.

Goods prices inched up just 0.1%, held down by a 0.4% decline in energy costs. Food prices were marginally higher, rising 0.1%, while core goods excluding food and energy saw a 0.3% increase. Even with these modest gains, overall price pressures appeared subdued.

Tariffs and Labor Concerns Enter Fed Calculus

Though inflation remains above the Fed’s 2% target, officials have pointed to easing rent and wage pressures as reasons for patience. However, Trump-era tariffs continue to impact specific categories, including a 2.3% surge in tobacco prices. The broader concern remains whether these tariffs, combined with slowing job growth, could weigh more heavily on economic activity.

Recent data revisions showing nearly 1 million fewer jobs created in the year ending March 2025 have heightened concerns over labor market health, even as Fed commentary continues to frame employment as “solid.” This reassessment could be another factor pushing policymakers toward easing.

Fed Rate Cut Outlook: Bullish Case Builds, But Eyes on CPI

The PPI data adds to the bullish narrative for a Fed rate cut next week. However, traders are watching Thursday’s Consumer Price Index (CPI) print closely for confirmation. If CPI also shows easing inflation, expectations for not just a rate cut—but potentially more than one—could solidify. For now, bond markets and equity futures suggest growing confidence that the Fed will deliver, keeping the short-term outlook for equities bullish and Treasury yields under pressure.

Source: FX Empire

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Michael Ross

“While our central projection for the OCR is to fall to around 2.5% by the end of the year, that could occur faster or slower,” Hawkesby said Thursday in opening remarks to a financial conference. “Further data on the speed of New Zealand’s economic recovery will be what influences the future path of the OCR.”

“By the August Monetary Policy Statement, the main surprise was how much of a hit to domestic household and business confidence had occurred,” Hawkesby said Thursday. “The economy appeared to stall in the middle of the year, creating even more economic slack.”

He also signaled regret that while the RBNZ had been topical this year, it was for mainly wrong reasons

“It’s typical for the RBNZ to be ‘in the news’ for our policy decisions, publications and research,” he said. “But for too long this year the RBNZ has been ‘the news,’ following the departure of the Governor in March, the loss of our Board Chair in August, and everything in between.”

Source: Bloomberg Europe

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Winkelmann

Forex

Political

Economic

Reserve Bank of New Zealand Governor Christian Hawkesby reiterated that the bank’s central projection is for the Official Cash Rate to fall by another half-percentage point by year’s end, though the pace of reductions will depend on incoming data.“While our central projection for the OCR is to fall to around 2.5% by the end of the year, that could occur faster or slower,” Hawkesby said Thursday in opening remarks to a financial conference. “Further data on the speed of New Zealand’s economic recovery will be what influences the future path of the OCR.”

The central bank last month resumed rate cuts after pausing in July as the sputtering recovery eased concerns about an uptick in price pressures. The RBNZ reduced the key rate to a three-year low of 3% as it said the stalling economy gave it scope to add stimulus as US tariffs and a stagnant housing market dented confidence.“By the August Monetary Policy Statement, the main surprise was how much of a hit to domestic household and business confidence had occurred,” Hawkesby said Thursday. “The economy appeared to stall in the middle of the year, creating even more economic slack.”

While the RBNZ and many economists expect the economy contracted in the second quarter, growth is expected to resume in the second half of 2025 as lower borrowing costs encourage household spending.Hawkesby said the “confidence shock” the economy suffered in the middle of the year stemmed from uncertainty about the impact of US tariff policies, though cost-of-living pressures and sluggish house prices also weighed on domestic sentiment.Going forward, policymakers will continue to monitor second-round impacts of US tariff policies on both global growth and New Zealand businesses, the governor said in response to a question. However, he said, leading economic indicators for July were “better” and consistent with the RBNZ’s expectations of growth returning in the third and fourth quarters.

Hawkesby also signaled regret that while the RBNZ had been topical this year, it was for mainly wrong reasons“It’s typical for the RBNZ to be ‘in the news’ for our policy decisions, publications and research,” he said. “But for too long this year the RBNZ has been ‘the news,’ following the departure of the Governor in March, the loss of our Board Chair in August, and everything in between.”Hawkesby said the RBNZ “is not all about one person” and has structures in place that ensure it can handle a turnover in leadership.

“We are facing a test of trust and confidence in us as an organization,” he said. The governance structure “means that in times like these with turnover in leadership, we have the continuity to push ahead with an ongoing emphasis on delivering our mandate.”Hawkesby, who has put his name forward to be Adrian Orr’s permanent replacement, said he like all central bankers was watching developments in the US that may impact on the independence of the Federal Reserve.In New Zealand, local politicians — including Prime Minister Christopher Luxon — have suggested the RBNZ could have been more aggressive with its rate cuts. Hawkesby said his job is to ignore the political talk and deliver on his inflation mandate.

Source: Bloomberg Europe

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Alexander

Israel's leaders are doubling down on (indirect) threats toward Qatar after Tuesday's surprise strike on a Doha home and office which killed five top Hamas leaders and negotiators.

Qatari leaders have expressed outrage over the violation of their country's sovereignty, but Israeli Ambassador to the US, Yechiel Leiter, has said Wednesday that Israel could strike Qatar again if it harbors terrorists - though oddly, the Hamas team was there as part of public US-backed diplomatic talks.

"If we didn’t get them this time, we’ll get them the next time," Amb. Leiter told Fox News. He further declared that the strikes on Qatar's capital might "actually advance the efforts for a ceasefire and peace." President Trump had actually said something similar.

"Right now, we may be subject to a little bit of criticism," the Israeli diplomat said. "They'll get over it. And Israel is being changed for the better. The region is being changed for the better as we remove these enemies of peace and these enemies of Western civilization from their ability to implement terrorism," he added.

Israeli Prime Minister Benjamin Netanyahu said something similar, which is sure anger Qatari leaders further. "I say to Qatar and all countries that provide shelter to terrorists, either deport them or bring them to justice. Because if you don't, we will," he said.

And referencing 9/11 memorial events in the Wednesday comments, Netanyahu said: "Tomorrow is September 11th. We remember September 11th. On that day, Islamist terrorists committed the worst crime on American soil since the founding of the United States. We also have September 11th."

He continued, "We remember October 7th. On that day, Islamist terrorists committed the worst crime against the Jewish people since the Holocaust. What did America do in the wake of September 11th? It promised to hunt down the terrorists who committed this terrible crime, wherever they may be."

This suggests Israel believes itself to have 'freedom of action' to conduct 'counter-terror' operations across the whole region.

Netanyahu gave his televised address in English:

Meanwhile, Qatar's relations with the US also looked strained, as its Foreign Ministry has rejected that the country was notified of the attack ahead of time. "I completely reject that the Americans informed us before the attack. Israel's action is a terrorist act," a statement said. This despite Doha hosting US CENTCOM operational headquarters, and having close ties with US intelligence as well as Gulf GCC countries.

The Abraham Accords could unravel, or at the very least it is not expected the Trump-brokered pact will expand.

Source: Zero Hedge

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Winkelmann

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Forex

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UBS Group AG Chief Executive Officer Sergio Ermotti said the impact of global tariffs on the US economy and Federal Reserve monetary policy remains unclear.“In the US, we still believe that growth will be there but the inflation question and how it plays out into the central bank’s policies remains open,” Ermotti said in a Bloomberg Television interview in Hong Kong on Thursday.While a reduction to interest rates by the Federal Reserve at its Sept. 16-17 meeting is baked into expectations, beyond that investors are shifting predictions on the pace of policy adjustments.

“The true issue on tariffs will be seen on consumers,” Ermotti, 65, said. “In the US, we need to see exactly if there is an inflationary aspect of tariffs. I think it’s unclear.”Goldman Sachs Group Inc. CEO David Solomon signaled this week that there’s no need for the Fed to rapidly cut rates, diverging from the Trump administration’s pressure on the central bank to loosen monetary policy.The Swiss economy ministry is seeking input from UBS as it scrambles to get an improved US trade deal, Bloomberg reported last month. The Trump administration has imposed 39% levies on Switzerland’s exports to the US, the highest tariff rate for any developed nation, posing a major threat to businesses and the economy.

The potential role in helping the government navigate the tariffs could help boost UBS’s standing with Swiss authorities after relations tensed over proposed capital rules that the bank opposes.Ermotti described the capital proposal as “excessive” and called the debate on banking regulation in Switzerland a “huge distraction.”Switzerland unveiled proposals to toughen its bank capital rules following the 2023 collapse of Credit Suisse, which was merged into UBS to create a lender that would likely be too big to rescue. The move could add as much as $26 billion to UBS’s existing capital demands, according to government estimates.

That has led to debate over whether the country’s largest lender might limit its growth or even move headquarters. Ermotti reiterated that the bank has no plans to shrink its business and wants to keep operating out of Switzerland.

Source: Bloomberg Europe

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Samantha Luan

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Political

Economic

THURSDAY, SEPTEMBER 11

FRANKFURT - Governing Council of the ECB holds monetary policy meeting in Frankfurt(final day)

CLEVELAND – Federal Reserve Bank of Cleveland issues Median CPI for August - 1500 GMT.

DUBLIN - Participation in panel discussion by European Central Bank Board Member Sharon Donnery at "Lead, Innovate, Achieve: Championing Sustainability and Social Inclusion for 25 Years" organised by Business in the Community Ireland (BITCI) - 0830 GMT.

FRANKFURT - The ECB Podcast: President Christine Lagarde presents the latest monetary policy decisions - 1415 GMT.

LONDON - Bank of England executive director Sasha Mills speaks at Euroclear conference panel on modernising securities markets - 1510 GMT.

STOCKHOLM - Riksbank Governor Erik Thedéen gives a speech on how the control system is intended to function in an environment where the Riksbank is now reducing its holdings of securities. This will place greater demands on the banks to act in the overnight loan market and, if necessary, borrow and invest in the Riksbank - 1100 GMT.

WASHINGTON, D.C. - Federal Reserve issues Quarterly Financial Accounts of the United States - 1600 GMT.

FRANKFURT - ECB President Christine Lagarde speaks to reporters following the Governing Council's monthly monetary policy meeting - 1245 GMT

BERLIN - Press conference following the Governing Council meeting of the ECB in Frankfurt - 1230 GMT.

FRIDAY, SEPTEMBER 12

MADRID, Spain - Bank of Spain Governor, Jose Luis Escriva, interviewed in national radio station RNE - 0700 GMT

HELSINKI - ECB policy maker Olli Rehn holds press conference in Finland - 0800 GMT.

MONDAY, SEPTEMBER 15

PARIS - Participation by ECB President Christine Lagarde in ‘Conversations pour demain’ on the occasion of the 25th anniversary of Institut Montaigne in Paris, France - 1810 GMT.

TUESDAY, SEPTEMBER 16

MADRID - ECB board member and Bank of Spain Governor Jose Luis Escriva speaks at an event in Madrid.

STOCKHOLM - Riksbank executive board meeting - 0700 GMT

WASHINGTON, D.C. - U.S. Federal Reserve's Federal Open Market Committee (FOMC) starts its two-day meeting on interest rates (to Sept. 17)

WEDNESDAY, SEPTEMBER 17

FRANKFURT - Opening remarks by ECB President Christine Lagarde at 10th ECB Annual Research Conference joint with Stanford's Hoover Institution on “The Next Financial Crisis?” in Frankfurt, Germany - 0730 GMT.

MILAN, Italy - Participation by ECB Board Member Piero Cipollone in Associazione Bancaria Italiana's Executive Committee meeting in Milan, Italy - 0800 GMT.

AMSTERDAM - Keynote speech by ECB Board Member Piero Cipollone at De Nederlandsche Bank's Resilience Conference in Amsterdam, Netherlands - 1115 GMT.

WASHINGTON, D.C. - U.S. Federal Reserve's Federal Open Market Committee (FOMC) announces its decision on interest rates followed by statement - 1800 GMT

WASHINGTON, D.C. - U.S. Federal Reserve chairperson holds a news conference

OTTAWA - Bank of Canada key policy interest rate announcement - 1345 GMT.

THURSDAY, SEPTEMBER 18

LONDON - Keynote speech by Liz Oakes, external member of the Financial Policy Committee, Bank of England, at the Cross Market Operational Resilience Group 2025 conference – 1345 GMT.

MARSEILLE, France - Video message by ECB President Christine Lagarde at opening plenary of 1st edition of Global Leadership by Women Summit in Marseille, France - 0710 GMT.

FRANKFURT - Participation by ECB Board Member Claudia Buch in panel “Noisy Experts? Discretion in Regulation” at 10th ECB Annual Research Conference joint with Stanford's Hoover Institution on “The Next Financial Crisis?” in Frankfurt, Germany - 0800 GMT.

LONDON - Participation by ECB Vice President Luis de Guindos in livestreamed MNI Connect discussion 'Euro Area Growth and Inflation Outlook' in London, United Kindgom - 0800 GMT.

OTTAWA - Speech by Ron Morrow, Executive Director of Payments, Supervision and Oversight, Bank of Canada – 1930 GMT.

OSLO - Norway Central Bank announces interest rate decision and Monetary Policy Report 3/25 - 0800 GMT

LONDON - Bank of England announces rate decision and publishes the minutes of the meeting, after the rate decision - 1100 GMT

TOKYO - Bank of Japan holds Monetary Policy Meeting (to Sept. 19)

FRIDAY, SEPTEMBER 19

BEIJING - Bank of Japan Governor Kazuo Ueda speaks to reporters after the central bank concludes its policy meeting - 0230 GMT.

MONDAY, SEPTEMBER 22

TRONDHEIM, Norway - Speech by Deputy Governor of Norges Bank Pål Longva to Norges Bank’s Regional Network at BI Norwegian Business School in Trondheim.

BERGEN, Norway - Speech by Governor of Norges Bank Ida Wolden Bache to Bergen Næringsråd at Hotel Norge.

CLEVELAND, United States - Federal Reserve Bank of Cleveland President Beth Hammack speaks on "The Fed's Role in the Economy and Impact on Everyday Life" before a "Fed Talk" event, in Cleveland, Ohio. - 1600 GMT

WASHINGTON DC - Federal Reserve Bank of St. Louis President Alberto Musalem speaks on the outlook for the U.S. economy and monetary policy at the Brookings Institution – 1400 GMT.

OTTAWA - Bank of Canada Deputy Governor Sharon Kozicki is panellist at a Workshop, “Monetary policy frameworks: recent developments and outlook – an international comparative view”, jointly organized by the BIS, the ECB and SUERF by videoconference – 1945 GMT.

STOCKHOLM - Meeting of the Executive Board of the Riksbank – 0830 GMT.

STOCKHOLM - Riksbank holds Monetary policy meeting at which the Executive Board takes a decision on monetary policy including the policy rate - 0700 GMT

TUESDAY, SEPTEMBER 23

SASKATOON, Canada - Speech by Tiff Macklem, Bank of Canada Governor at Saskatchewan Trade and Export Partnership (STEP) - Greater Saskatoon Chamber of Commerce – 1830 GMT.

STOCKHOLM - Riksbank publishes monetary policy decision, including the policy rate and the Monetary Policy report for September 2025 - 0730 GMT

STOCKHOLM - The Riksbank is arranging a press conference on the September monetary policy decision - 0900 GMT

WEDNESDAY, SEPTEMBER 24

SALT LAKE CITY, United States - Federal Reserve Bank of San Francisco President Mary Daly speaks on the economic outlook before the annual Spencer Fox Eccles Convocation presented by the National Association of Corporate Directors, Utah Chapter, in Salt Lake City, Utah. - 2010 GMT

BERLIN - German Finance Minister Lars Klingbeil to speak on Germany's investment strategy and the future of the EU at Hertie School in Berlin - 1430 GMT

TOKYO - Bank of Japan releases Minutes of Monetary Policy Meeting held on Jul. 30 and 31 - 2350 GMT

BERLIN - Governing Council of the ECB holds non-monetary policy meeting (Virtual)

THURSDAY, SEPTEMBER 25

GRAND RAPIDS, United States - Federal Reserve Bank of Chicago President Austan Goolsbee participates in a moderated question-and-answer session before Crain's Power Lunch, "The Fed and the Economy: Trends for West Michigan," in Grand Rapids, Mich. - 1220 GMT

SALT LAKE CITY, United States - Federal Reserve Bank of San Francisco President Mary Daly participates in conversation before the Federal Reserve Bank of San Francisco 2025 Western Bankers Forum, in Salt Lake City, Utah. - 1930 GMT

BERN - Swiss National Bank (SNB) Monetary policy assessment with news conference - 0730 GMT

BERLIN - General Council meeting of the ECB (Virtual)

FRIDAY, SEPTEMBER 26

STOCKHOLM - Riksbank general council meeting - 1100 GMT

MONDAY, SEPTEMBER 29

SAPPORO – Speech by BOJ Board Member Asahi Noguchi at a meeting of the Sapporo Chamber of Commerce and Industry in Sapporo – 0530 GMT.

FRANKFURT - Federal Reserve Bank of Cleveland President Beth Hammack participates in policy panel before hybrid "Inflation: Drivers and Dynamics Conference 2025" hosted by the European Central Bank (ECB) and the Center for Inflation Research and the Federal Reserve Bank of Cleveland, in Frankfurt, Germany – 1200 GMT.

STOCKHOLM - Riksbank publishes minutes from the monetary policy discussion on 22 September 2025 - 0730 GMT

TOKYO - Bank of Japan to release summary of opinions from board members at its Sept. 18-19 policy meeting - 2350 GMT

TUESDAY, SEPTEMBER 30

CHICAGO - Federal Reserve Bank of Chicago President Austan Goolsbee participates in fireside chat before the Federal Reserve Bank of Chicago Midwest Agriculture Conference: Midwest Agriculture and Trade Uncertainty - 1700 GMT.

WEDNESDAY, OCTOBER 1

HELSINKI - ECB policymaker and Finnish central bank governor Olli Rehn meets with Finnish media in Helsinki. - 0800 GMT

OTTAWA – Bank of Canada publishing a summary of monetary policy deliberations by the Governing Council for the policy decision - 1730 GMT

THURSDAY, OCTOBER 2

TOKYO - BOJ Deputy Governor Shinichi Uchida to deliver speech at annual securities' lobby meeting - 0635 GMT.

FRIDAY, OCTOBER 3

TOKYO - BOJ Governor Kazuo Ueda to meet business leaders in Osaka, hold news conference – 0105 GMT.

MONDAY, OCTOBER 6

EDINBURGH, United Kingdom - Bank of England Governor Andrew Bailey speaks at Scotland's Global Investment Summit.

WEDNESDAY, OCTOBER 8

WASHINGTON DC - Federal Open Market Committee issues minutes from its meeting of September 16-17, 2025 – 1800 GMT.

WELLINGTON - Reserve Bank of New Zealand (RBNZ) holds Monetary Policy Review and OCR - 0100 GMT

STOCKHOLM - Riksbank executive board meeting - 0700 GMT

MONDAY, OCTOBER 13

LONDON - Bank of England's Monetary Policy Committee Member Megan Greene gives the keynote speech at the Society of Professional Economists' annual conference - 1105 GMT.

PHILADELPHIA - Federal Reserve Bank of Philadelphia President Anna Paulson speaks on "A View from the Federal Reserve Bank of Philadelphia" before the National Association for Business Economics 67th Annual Meeting, "Global Economy in Transition: Finding Opportunity Amid Disruption" - 1610 GMT

TUESDAY, OCTOBER 14

WASHINGTON DC - Fireside chat with Deputy Governor of RBA Andrew Hauser, at the NYU Money Marketeers – 2145 GMT.

WEDNESDAY, OCTOBER 15

WASHINGTON DC - Federal Reserve issues the Beige Book - 1800 GMT

FRIDAY, OCTOBER 17

WASHINGTON DC - Panel participation by RBA Deputy Governor Andrew Hauser, at the Institute of International Finance (IIF) – 0715 GMT.

TUESDAY, OCTOBER 21

WASHINGTON - Federal Reserve Board hosts a conference on payments innovation, to include panel discussions on several aspects of payments innovation, including the convergence of traditional and decentralized finance; emerging stablecoin use cases and business models; the intersection of artificial intelligence and payments; and the tokenization of financial products and services.

WEDNESDAY, OCTOBER 22

STOCKHOLM - Riksbank Governor Erik Thedéen gives his view on the economy, payments and financial stability in uncertain times - 1600 GMT.

STOCKHOLM - Riksbank executive board meeting - 0700 GMT.

TUESDAY, OCTOBER 28

WASHINGTON, D.C. - U.S. Federal Reserve's Federal Open Market Committee (FOMC) starts its two-day meeting on interest rates (to Oct. 29)

WEDNESDAY, OCTOBER 29

WASHINGTON, D.C. - U.S. Federal Reserve's Federal Open Market Committee (FOMC) announces its decision on interest rates followed by statement - 1800 GMT.

WASHINGTON, D.C. - U.S. Federal Reserve chairperson holds a news conference.

OTTAWA - Bank of Canada key policy interest rate announcement and Monetary Policy Report - 1345 GMT.

TOKYO - Bank of Japan holds Monetary Policy Meeting (to Oct. 30)

FLORENCE, Italy - The Governing Council of the European Central Bank meets in Florence. The Bank of Italy Governor joins the ECB's President and Vice President at the press conference. (To Oct. 30)

THURSDAY, OCTOBER 30

JAPAN - Bank of Japan Governor Kazuo Ueda speaks to reporters after the central bank concludes its policy meeting - 0230 GMT.

ROME - ECB President Christine Lagarde speaks to reporters following the Governing Council's monthly monetary policy meeting in Italy - 1345 GMT.

ROME - Press conference following the Governing Council meeting of the ECB hosted by Bank of Italy - 1230 GMT.

ROME - Governing Council of the ECB holds monetary policy meeting hosted by Bank of Italy.

TUESDAY, NOVEMBER 4

STOCKHOLM - Riksbank holds Monetary policy meeting at which the Executive Board takes a decision on monetary policy including the policy rate - 0800 GMT.

TOKYO - Bank of Japan releases Minutes of Monetary Policy Meeting held on Sept. 18 and 19 - 2350 GMT.

WELLINGTON - Reserve Bank of New Zealand (RBNZ) publishes 6-monthly Financial Stability Report (FSR) (to Nov. 5)

WEDNESDAY, NOVEMBER 5

STOCKHOLM - Riksbank publishes monetary policy decision, including the policy rate, and the Monetary Policy update for November 2025 - 0830 GMT.

STOCKHOLM - The Riksbank is arranging a press conference on the November monetary policy decision - 1000 GMT.

THURSDAY, NOVEMBER 6

OSLO - Norway Central Bank announces interest rate decision - 0900 GMT.

LONDON - Bank of England to publishes Monetary Policy Report - 1200 GMT.

LONDON - Bank of England announces rate decision and publishes the minutes of the meeting, after the rate decision - 1200 GMT.

SUNDAY, NOVEMBER 9

TOKYO - Bank of Japan to release summary of opinions from board members at its Oct. 29-30 policy meeting - 2350 GMT.

TUESDAY, NOVEMBER 11

STOCKHOLM - Riksbank executive board meeting - 0800 GMT.

STOCKHOLM - Riksbank publishes minutes from the monetary policy meeting on 4 November 2025 - 0830 GMT.

THURSDAY, NOVEMBER 13

STOCKHOLM - Riksbank publishes Financial Stability Report 2025:2 - 0830 GMT.

STOCKHOLM - Riksbank holds press conference on financial stability - 1000 GMT.

FRIDAY, NOVEMBER 14

STOCKHOLM - Riksbank general council meeting - 1200 GMT.

WEDNESDAY, NOVEMBER 19

BERLIN - Governing Council of the ECB holds non-monetary policy meeting (Virtual).

THURSDAY, NOVEMBER 20

BERLIN - General Council meeting of the ECB (Virtual).

WEDNESDAY, NOVEMBER 26

WELLINGTON - Reserve Bank of New Zealand (RBNZ) holds Monetary Policy Statement and OCR - 0100 GMT.

STOCKHOLM - Riksbank executive board meeting - 0800 GMT.

Source: TradingView

To stay updated on all economic events of today, please check out our Economic calendar

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James Whitman

Central Bank

Economic

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 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.

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.