Pan Sheng Macro: Eurozone inflation will keep the European Central Bank cautious

According to a client report by Claus Vistesen and Melanie Debono, analysts at Pantheon Macroeconomics, the rebound in Eurozone inflation will prevent the European Central Bank from further cutting interest rates next month. Vistesen and Debono stated that last week’s business survey highlighted the threat of economic contraction in the Eurozone, which could lead to calls for a 50 basis point rate cut at the policy meeting in December instead of 25 basis points. However, according to Pantheon Macroeconomics’ estimation, the inflation rate this month will rise, surpassing the European Central Bank’s target of 2%. Economists believe that this will prompt policymakers to remain cautious, with the most likely decision being a 25 basis point rate cut.