by Francesco Canepa and Balazs Koranyi
FRANKFURT (Reuters) – Monetary policymakers at the European Central Bank (ECB) who favor easing monetary policy will argue for a rate cut in October, while members favor keeping rates at a high level could oppose it, seven sources told Reuters.
Monetary policy makers had deemed an October cut unlikely just after the ECB’s latest decision, but disappointing PMI indicators, slowing wages and weak German morale pushed dovish policymakers to position themselves for a cut in October, according to sources.
More restrictive policymakers, however, will oppose easing monetary policy, arguing that survey data often paints a less positive picture of the state of the economy, the sources added.
Some of them have discussed a sort of compromise that would be to opt for the status quo in October and then cut rates in December if the data does not improve, but such a solution contradicts the “meeting by meeting” approach. ” advocated by the ECB.
An ECB spokesperson declined to comment.
The next ECB monetary policy meeting is not for another three weeks and key data is still awaited, such as September inflation next week. All options are therefore still on the table, especially since certain key officials have not yet decided anything, the sources said.
Restrictive monetary policymakers believe that “hard” data, such as wage growth, growth figures and the ECB’s own projections, should guide the central bank’s decisions. However, this data will only be available in December.
Money markets consider a rate cut to be 79% likely next month.
(Francesco Canepa, Balazs Koranyi, Corentin Chappron, edited by Blandine Hénault)
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