ECB Expected to Cut Rates in December

In October, the Eurozone reported mixed economic signals, with a slight increase in PMI Manufacturing and a minor decrease in PMI Services, leading to a Composite PMI of 49.7, indicating continued contraction. Chief Economist Cyrus de la Rubia noted persistent inflation driven by wage growth, which may influence the European Central Bank (ECB) to consider a 25bps rate cut in December instead of a larger reduction. ECB Governing Council member Robert Holzmann indicated that while a 25bps cut is likely, he remains cautious about inflation risks. There is an ongoing debate among ECB policymakers about the potential for a 50bps cut, with some expressing openness to this option depending on future economic data. The ECB's approach will depend on various economic indicators, including inflation dynamics and monetary transmission strength. Overall, the ECB's December meeting could see a shift in policy, influenced by the evolving economic landscape.