🎈 Up Big Today: Find today's biggest gainers with our free screenerTry Stock Screener

Exclusive-Some ECB governors wanted to drop pledge to keep policy tight, sources say

Published 10/18/2024, 05:33 AM
Updated 10/18/2024, 10:46 AM
© Reuters. FILE PHOTO: A view of European Central Bank (ECB) headquarters in Frankfurt, Germany July 18, 2024. REUTERS/Jana Rodenbusch/File Photo

By Francesco Canepa and Balazs Koranyi

FRANKFURT (Reuters) - Some European Central Bank governors at Thursday's rate-setting meeting made the case for dropping a pledge to keep policy tight as inflation may now turn out lower than anticipated only a few weeks ago, five sources told Reuters.

Their idea did not gain traction but it suggests the debate within the ECB, which cut interest rates on Thursday for the third time this year, was increasingly shifting from battling high inflation to reviving lacklustre economic growth.

At the meeting, some policymakers suggested inflation may stabilise at the ECB's 2% target a few quarters earlier than the last three months of next year, as was predicted by the bank's staff only last month, the sources said.

They argued for dropping a long-standing pledge to keep borrowing costs "sufficiently restrictive for as long as necessary", the sources added.

Economists say rates are restrictive when they are high enough to slow down the economy and, with it, inflation, so the change would have signalled that more rate cuts were coming.

An ECB spokesperson declined to comment.

ECB President Christine Lagarde said during her press conference inflation would fall to 2% "in the course of next year", rather than "over the second half of next year" as she had said after the Sept. 12 meeting. The bank will publish new projections at its next policy meeting on Dec. 12.

© Reuters. FILE PHOTO: A view of European Central Bank (ECB) headquarters in Frankfurt, Germany July 18, 2024. REUTERS/Jana Rodenbusch/File Photo

Lagarde did not provide hints about future rate cuts but four sources close to the matter told Reuters on Thursday that a fourth cut in December was likely unless economic or inflation data turns around in the coming weeks.

Yet, the U.S. elections, and the threat of fresh trade tariffs if Donald Trump is elected president, were seen as a major source of uncertainty, the sources added.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.