Alibi, zero. The collapse in oil prices removes from the field the most concrete and current element that could have fueled resistance to the imminent ECB meeting on Thursday on a further cut in interest rates, probably by 25 basis points. Yesterday, in fact, the decline in black gold prices became even more pronounced. Midway through the session in Europe, a barrel of Brent, the North Sea benchmark crude oil, fell 4.75% to $73.78. And in after-hours trading on the North American market, West Texas Intermediate came close to minus 5%, falling to $70.16, the lowest value since the beginning of the month. And in any case, the assurances coming from Israel that retaliation for Iran’s missile attack will not hit oil installations have been combined with the developments on the economic side mentioned above, which do not bode well for vigorous levels of demand.
At this point the die is cast, or rather, it should be. Especially because, to reinforce the reasons for a cut, there is a more rigorous inflation trajectory than expected in the Euro Zone. The central bank board will travel to Ljubljana, Slovenia, between tonight and tomorrow morning, for one of the meetings that periodically take euro zone central bankers on rotation to countries that use the shared currency. Monetary policy decisions will be announced at 2pm and 3pm on Thursday, half an hour later President Christine Lagarde will give the usual explanatory press conference. In recent weeks it was the president herself, together with other members of the institution, who sent signals in which traders and analysts read a clear indication of the intention to carry out a new cut in rates this month of October, where previously a pause and a new cut only in December.
The rapid decline in inflation, which fell to 1.8% in the Eurozone in September, together with the weakening of business activity, therefore seems to lead the ECB to accelerate the pace of its maneuver to reduce the monetary brake. The price stability objective pursued by Frankfurt is quantified as an average inflation for the euro area of 2%, however referring to a reasonably long period, also from a future perspective, and not to a single month. And to think that last week’s oil price increases created an additional element of uncertainty in these scenarios. But evidently this is not the case.
Source: IL Tempo
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
