by Balazs Koranyi and Francesco Canepa
FRANKFURT (Reuters) – The European Central Bank (ECB) is expected to keep interest rates unchanged on Thursday and is expected to disappoint the hopes of investors, who anticipate monetary easing from the spring, despite the risks of recession and the rapid slowdown in inflation.
The ECB kept rates at their current levels in December and signaled that it did not expect any further hikes, while warning that it was too early to talk about easing monetary policy.
Investors are betting on rapid easing, believing that the ECB’s outlook for growth and price dynamics is flawed.
However, such a turnaround is not on the agenda for the moment, particularly after senior officials of the institution tried last week to convince the markets that rates would be left at a plateau for some time to come. .
ECB President Christine Lagarde is expected to argue that underlying price pressures remain strong, particularly in the services sector, while risks – such as wage deals being negotiated or tensions geopolitical issues, particularly in the Red Sea – persist.
Markets are now pricing in a 130 basis point rate cut by the end of the year, with the first cut in April or June, a significant change from the previous two weeks, when it was expected a 150 basis point cut in rates from March or April.
The ECB will announce its monetary policy decision at 1:15 p.m. GMT. Christine Lagarde will speak at a press conference at 1:45 p.m. GMT.
(Reporting Balazs Koranyi and Francesco Canepa; Camille Raynaud)
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