2025-10-30 17:53

FLORENCE, Italy/FRANKFURT, Oct 30 (Reuters) - European Central Bank policymakers are preparing for something of a showdown at their next meeting in December, when new three-year projections will shed light on whether or not they risk undershooting their target, four sources told Reuters. The European Central Bank kept interest rates unchanged at 2% for the third meeting in a row on Thursday and repeated that policy was in a "good place" as economic risks recede and the euro zone shows resilience in the face of uncertainty. Sign up here. Policymakers were generally sanguine about economic growth but views differed when it came to inflation, which the euro zone's central bank expects to slip below its 2% target next year before bouncing back in late 2027, the sources said. The ECB will publish its first set of projections for 2028 in December and some policymakers thought that clear evidence pointing to a continued undershooting in inflation that year would justify debating a rate cut at the meeting, the sources said. But others argued that long-term projections should be taken with a pinch of salt, given their track record, and in any case, a modest undershooting of just 20 or 30 basis points can be tolerated, the sources added. An ECB spokesperson declined to comment. HOW MUCH WIGGLE ROOM? The debate is partly about how far the bank should be allowed to stray from its inflation target before policy needs to be adjusted. The ECB's strategy, published earlier this year, allows for some wiggle room but does not precisely define its extent because it is "context-specific and depends on the origin, magnitude and persistence of the deviation", leaving policymakers with different views. The ECB publishes point estimates for inflation as well as lower and upper bounds that represent the likely range of outcomes. ECB President Christine Lagarde said at her news conference on Thursday that the central bank's "good place" for policy was not "fixed" and policymakers would treat the risk of undershooting as seriously as that of overshooting -- a principle known as symmetry. https://www.reuters.com/business/finance/ecb-policymakers-prepare-december-showdown-inflation-rates-2025-10-30/

2025-10-30 16:20

ECB holds deposit rate at 2%, markets shrug Traders expect ECB to keep rates on hold through 2026 Euro zone growth outlook stable, risks to growth abating, says ECB LONDON, Oct 30 (Reuters) - Traders were confident in their view that the European Central Bank would keep rates on hold for now after it left policy unchanged, flagging a more resilient economy and appearing more relaxed about the growth outlook. The ECB held the deposit rate at 2% for a third straight meeting on Thursday, having cut by 200 basis points since it began easing in June 2024, with President Christine Lagarde repeating it is in a "good place". Sign up here. All this left traders betting that the ECB will more likely hold interest rates, than cut again in this cycle. Traders now price in about 10 basis points of rate cuts by mid-2026, implying about a 40% chance of another quarter-point rate cut, down from about 50% on Monday. Economic activity remains resilient despite risks from trade and geopolitical tensions. Inflation is also back under control after the post-COVID spike and is close to the ECB's 2% target. "They're in a sweet spot, this Goldilocks scenario, from a monetary policy perspective," said Brown Brothers Harriman senior markets strategist Elias Haddad. "The inflation and economic backdrop in the euro zone argues for the ECB to continue standing pat here." NO MORE CUTS? "The market is right, if there is a move in the next six months it's likely to be a cut," said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, adding that another cut was not his baseline forecast but a risk. The euro rose slightly as traders trimmed their bets, but remained down 0.3% against the dollar at $1.1572. The dollar was broadly higher a day after Federal Reserve Chair Jerome Powell introduced some uncertainty over a December rate cut. Germany's rate-sensitive two-year yield was up 2 basis points at around 2%, benchmark 10-year Bund yields were also up 2 bps at 2.64%, while European stock markets (.STOXX) , opens new tab were a touch lower on the day. Those moves have been helped by expectations for more hawkish Fed policy, given U.S. influence on the global economy. This week's thawing in U.S.-China trade tensions and more robust euro zone growth data have also tempered rate cut bets. DOWNSIDE RISKS TO GROWTH ABATE The euro zone economy grew quicker than expected in the third quarter, official data showed, as buoyant consumption offset faltering exports and persistent struggles in Germany. The growth outlook has remained stable and many economists expect it to improve next year due to Germany's fiscal boost, as well as a lessening of trade tensions between the U.S. and major trading partners. Lagarde told the press conference that recent trade deals meant downside risks to growth were abating, although acknowledged that major areas of uncertainty persisted. Schroders Eurozone economist Irene Lauro said the improving growth outlook will keep the ECB on hold next year. "Uncertainty on the external outlook is diminishing, so the risks to growth are probably more skewed to the upside," Lauro said, adding: "We might start to think about the ECB hiking rates in 2027 with downside risks to growth dissipating". Germany's spending boost was also expected to give a lift to inflation next year, meaning the window for the ECB to lower borrowing costs could be closing. Euro zone inflation rose to 2.2% in September, above its target for the first time since April, as services prices rose and energy cost declines slowed. ECB staff see inflation averaging 1.7% next year and staying below the target through mid-2027. A flash estimate of October inflation for the bloc is due on Friday. https://www.reuters.com/world/euro-zone-markets-steady-ecb-offers-no-clues-outlook-2025-10-30/

2025-10-30 15:34

Most non-US cbanks hold rates on inflation, trade challenges SNB maintains 0% rate, inflation exceeds forecast Bank of Canada cuts rates, signals end to easing LONDON, Oct 31 (Reuters) - The U.S. Federal Reserve has moved back into line with other major rate setters after it cut rates by a quarter point on Wednesday but pushed back against market bets that it would keep going as the Washington shutdown fogs up its forecasting lens. The Bank of Japan and European Central Bank left rates unchanged on Thursday. Sign up here. Here's where 10 major central banks stand after the latest round of meetings: 1/ SWITZERLAND The Swiss National Bank cut its key rate to 0% in June and is widely expected to hold steady with markets pricing a long pause. In its first set of minutes detailing its rate setting discussions, published last week, the SNB quashed market speculation that it would return to negative rates to stop the strong franc pushing the sluggish economy into deflation. 2/ CANADA The Bank of Canada, battling an economic slowdown exacerbated by U.S. tariffs and the inflationary impact of the trade war, cut rates to a more than three-year low of 2.25% on Wednesday. It also sent strong signals that easing ends here and traders see more than 60% odds on the BoC standing pat until December 2026. 3/ SWEDEN Sweden's Riksbank meets next week after to 1.75% in September and saying it expects that elevated inflation will prove transitory. Money markets price in less than a one in five chance of further easing before 2026 as domestic inflation stays sticky, which has sent traders piling in to Sweden's crown . The currency has risen 15% against the dollar year-to-date. 4/ NEW ZEALAND The Reserve Bank of New Zealand cut rates by a punchy 50 basis points (bps) to 2.5% this month in an attempt to prop up a frail economy. Markets see a good chance of a further cut in late November, though inflation sitting at the top of the RBNZ's 1-3% target band could be a complication. 5/ EURO ZONE The ECB on Thursday matched traders' expectations and held the bloc's main deposit rate at 2% for a third straight meeting. Traders viewed this ECB easing cycle as almost over, pricing in less than a 50% chance of further easing by July 2026. 6/ UNITED STATES The Fed on Wednesday executed a widely flagged 25 bps cut but pushed back against market bets for more by warning that data gaps caused by the U.S. government shutdown were clouding its forecasting lens. "If you're driving in the fog you slow down," Chair Jerome Powell said in his post-announcement press conference. The rate cut drew dissent from two policymakers, with Stephen Miran again calling for a deeper reduction and Kansas City Fed President Jeffrey Schmid favoring no cut given above-target inflation. Traders price a 70% probability of a 25 bps December cut, down from 84% ahead of Wednesday's decision. 7/ BRITAIN The Bank of England is another major rate setter that is signalling cautious moves from here as it kept rates unchanged at its last meeting and said inflation risks remained high. Traders expect another hold on November 6 but markets price a 60% chance of a December cut after above-target UK inflation at least held steady in September. 8/ AUSTRALIA The Reserve Bank of Australia has cut rates by 75 bps since February but hotter-than-expected inflation encouraged it to hold rates steady and turn more hawkish in September. That trend has continued, pushing expectations for the next cut forward to at least February 2026. . 9/ NORWAY Norway's central bank eased borrowing costs by 25 bps to 4.0% in September but signalled further cuts were less likely because underlying inflation was rising. That has helped the crown keep powering higher against the dollar, with a 12% gain for the year so far . 10/ JAPAN The Bank of Japan, the sole central bank in hiking mode, kept rates steady on Thursday but repeated its pledge to keep increasing borrowing costs if the economy moves as it projects, shifting investor focus to December's meeting. The yen weakened after the announcement. U.S. Treasury Secretary Scott Bessent this week called for speedier BOJ rate hikes to avoid weakening the currency too much. https://www.reuters.com/business/finance/global-markets-cenbank-graphic-2025-10-30/

2025-10-30 14:49

MEXICO CITY, Oct 30 (Reuters) - Mexico's economy contracted 0.3% in the third quarter from the previous three-month period, preliminary data showed on Thursday, marking its first year-on-year quarterly decline since 2021 and raising prospects its central bank will press ahead with a fresh interest rate cut next week. Mainly impacted by a slowdown in industrial activity, Latin America's second-largest economy broke two consecutive quarters of gross domestic product growth, though data from the national statistics agency INEGI was in line with forecasts from economists polled by Reuters. Sign up here. Secondary or manufacturing activities were down 1.5% on a sequential basis, the data showed, offsetting growth of 3.2% in the economy's primary sector, which includes farming, fishing and mining. Services, meanwhile, expanded 0.1%. The data was released ahead of the Bank of Mexico's November 6 monetary policy decision. Policymakers last month cut borrowing costs to their lowest level since May 2022 and indicated they would consider further easing. Concerns over global trade tensions and sluggish economic growth have weighed on recent decisions by the central bank, also known as Banxico. Kimberley Sperrfechter, an emerging markets economist at Capital Economics, said the GDP contraction and a dip in inflation in early October make it likely the central bank will cut its key interest rate by 25 basis points to 7.25% next week. "With the economy likely to remain relatively weak and inflation set to remain within the target range, we think that Banxico will cut its policy rate to a below-consensus 6.25% by the end of next year," she added. Compared with the same period a year earlier, the Mexican economy shrank 0.2% in the third quarter - the first year-on-year contraction since early 2021, when global economic activity was still reeling from the pandemic. Economists at Banamex said they expect a moderate economic recovery in coming quarters, but warned about "high uncertainty due to both external and internal factors." They forecast GDP to grow 0.4% this year and 1.5% in 2026. https://www.reuters.com/world/americas/mexican-economy-contracts-third-quarter-industrial-activity-slows-2025-10-30/

2025-10-30 12:51

WASHINGTON, Oct 30 (Reuters) - U.S. Treasury Secretary Scott Bessent on Thursday applauded the Federal Reserve's decision to cut interest rates by a quarter percentage point, but said comments casting doubt on another rate cut this year showed the institution needed a major revamp. Bessent told Fox Business Channel's "Mornings with Maria" that he would carry out a second round of interviews of candidates to replace Fed Chair Jerome Powell in early December, allowing President Donald Trump to choose a replacement by Christmas. Sign up here. The goal, he said, was to find a new leader for the U.S. central bank who would overhaul the entire institution. "The decision by the Federal Reserve yesterday - the decision to cut rates by 25 basis points, I applaud, but the language that went with it, tells me that this Fed is stuck in the past. Their inflation estimates have been terrible so far this year," he said. "Their models are broken." Bessent said he could not understand why the Fed was signaling that it didn't want to cut rates at its December meeting, saying their estimates of gross domestic product and inflation had been "consistently wrong." "We're going to find a leader who is going to revamp the entire institution in terms of process and inner workings," he said. Powell told reporters on Wednesday that a policy divide within the U.S. central bank and a lack of federal government data may put another interest rate cut out of reach this year. The Fed on Wednesday cut interest rates by a quarter of a percentage point, as expected, as a way to temper any further weakening of the job market. But the central bank's new policy statement included several references to the lack of official data during a federal government shutdown. Powell said policymakers are likely to become more cautious if it deprives them of further job and inflation reports. Trump, who has been critical of Powell's leadership of the Fed since before starting his second term, on Tuesday blasted the central banker as "incompetent" during a meeting with business leaders in Tokyo. On Monday, Bessent told reporters there were five finalists to replace Powell when his term as Fed chair ends in May: White House economic adviser Kevin Hassett, former Fed Governor Kevin Warsh, current Fed Governor Christopher Waller, Fed Vice Chair for Supervision Michelle Bowman and BlackRock executive Rick Rieder. https://www.reuters.com/business/us-treasurys-bessent-says-feds-language-shows-they-are-stuck-past-2025-10-30/

2025-10-30 12:47

LONDON, Oct 30 (Reuters) - Sterling steadied on Thursday against both the dollar and euro after two days of sharp depreciation, but looks set for further choppiness ahead of next week's Bank of England meeting. The pound was last at $1.3182, a touch above Wednesday's intraday over-five-month low of $1.3142. Sign up here. It was at 88.1 pence per euro, again just shy of Wednesday's 88.16 pence per euro, its softest since May 2023. The British currency this week has been shaped by traders and analysts' efforts to digest last week's raft of economic data - most notably softer than expected inflation figures - ahead of next week's BoE session. Goldman Sachs, for example, on Wednesday changed its BoE call and now expects a rate cut. Markets currently see around a one in three chance of a 25 basis point BoE rate cut next week, leaving the pound vulnerable to moves in either direction on the BoE's decision or as pricing shifts more firmly in favour of, or against, a cut. Also in the mix are rumours and speculation about the scale of tax rises and spending cuts British chancellor Rachel Reeves will have to pursue in her late November budget - greater fiscal tightening could lead to the BoE lowering rates more quickly. BofA analysts expect the BoE to keep rates on hold next month, which should buoy sterling. "However, with budget news-flow intensifying and (sterling) risk premium rising, we think this will be headwind to a (sterling) recovery," they wrote in a Thursday note. Further complicating the picture, they added, are month-end flows as asset managers rebalance their portfolios after this month's market moves and the "breach of key technical support levels in sterling crosses". As well as falling to a more than two-year low on the euro on Wednesday, the pound also hit multi-year lows on the Swiss franc as well as the Swedish and Norwegian crowns. , , https://www.reuters.com/world/uk/sterling-steadies-multi-month-lows-after-two-days-falls-2025-10-30/