Rate Pauses In View On Busy Day For Central Banks In Europe

Waning inflation is expected to see the European Central Bank opt for another pause Thursday, as it joins a slew of central banks announcing their final interest rate decisions of the year

Frankfurt, (UrduPoint / Pakistan Point News - 14th Dec, 2023) Waning inflation is expected to see the European Central Bank opt for another pause Thursday, as it joins a slew of central banks announcing their final interest rate decisions of the year.

The Bank of England, the Swiss National Bank and Norway's Norges Bank are also holding their last meetings of 2023, a year marked by steep hikes in borrowing costs as policymakers battled to tame runaway consumer prices.

With inflation dropping faster than expected in many countries and the economic outlook worsening, policymakers are expected to hold rates steady -- with the possible exception of Norway's central bank.

The US Federal Reserve led the way a day earlier, leaving its key lending rate at a 22-year-high amid a resilient labour market.

The Bank of England is likewise expected to stand pat for a third time and keep its main interest rate at 5.25 percent.

UK inflation slowed sharply to 4.6 percent in October but remains the highest among the G7 rich nations.

In Switzerland, where inflation has dipped below the two-percent target in recent months, the central bank is seen holding borrowing costs at 1.75 percent for a second straight meeting.

Norges Bank said last month it would "likely" raise its key rate in December but analysts are questioning whether it will follow through as a slump in building activity darkens the economic picture.

With little rate action expected on Thursday, investor attention has shifted to when central banks might start cutting rates, even as policymakers insist it is still too early to sound the all-clear on inflation.

In Frankfurt, where the ECB is widely predicted to leave rates unchanged for a second time, president Christine Lagarde is expected to push back against market hopes of a rate cut in the early months of 2024.

"Markets will probably have to correct some of their over-optimistic rate cut expectations once the ECB has spoken," said Berenberg bank economist Holger Schmieding.