Europe waits on knife-edge ECB decision
By Marc Jones
LONDON (Reuters) — Europe's markets were treading water in early trading on Thursday, as investors waited on a knife-edge decision from the European Central Bank on whether to ratchet up euro zone interest rates for a 10th straight meeting.
Stock markets saw carmakers go into reverse after Beijing blasted Brussels' move on Wednesday to investigate electric vehicle subsidies, but for both euro and bond traders it was very much a case of wait-and-see for the ECB.
The central bank for the 20 countries that share the euro faces a dilemma. Even after nine rate hikes in a row, prices are rising at more than twice its 2% target and are not expected to get back to that level for another two years.
A recent run of weak data had left investors leaning towards a pause until Reuters reported on Tuesday that the bank's new staff projections due at the meeting later would raise the inflation forecast for next year to more than 3% again.
«The economy is deteriorating quite quickly now and they will give them some concerns,» said Hans Peterson, the global head of asset allocation at SEB investment management, who expects the ECB to hold rates steady later.
«I think the discussion at this point is really about the maximum policy rate and how to prevent a hard landing in the economy».
The ECB's deposit rate is currently at 3.75%. June's ECB staff projections saw inflation at 3% in 2024 and 2.2% in 2025 and money markets are currently pricing roughly one more ECB hike this year and the first cut around the middle of next year.
The pre-ECB market moves included the euro tip-toeing away from a three-month low against the dollar at $1.0752. U.S. inflation data on Wednesday had failed to alter views for a Federal Reserve pause
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