Key Points
- The European Central Bank will likely keep interest rates unchanged in December.
- November’s expected inflation rate of 2.1% is very close to the ECB’s 2% target.
- Policymakers and economists are divided on whether the next rate move will be a cut or a hike.
- The U.S. Federal Reserve is in a similar position, watching inflation and jobs data closely.
European Central Bank officials are closely watching upcoming inflation data, which will likely convince them to keep interest rates unchanged at their December meeting. This pause would allow them to focus on crucial long-term economic forecasts.
Forecasters expect consumer prices in the eurozone to have risen by 2.1% in November, close to the ECB’s 2% target. A key underlying measure, which excludes volatile items such as energy, is expected to remain slightly higher at 2.4%. With inflation hovering close to the target, policymakers feel they have room to wait and see before taking drastic measures.
This doesn’t mean everyone agrees on the next step. The ECB is currently in a holding pattern, with no clear consensus on whether the next move should be a cut or a hike. Some officials, like Vice President Luis de Guindos, worry more about prices rising too fast. Economists are also divided, with some predicting future rate cuts while others believe a hike is still possible down the line.
This wait-and-see approach isn’t unique to Europe. Across the Atlantic, the U.S. Federal Reserve is facing a similar situation. Its preferred inflation gauge remains stubbornly above its target, and officials are debating their next move on interest rates while keeping a close eye on the job market.
Globally, other central banks are at a crossroads as well. The Bank of Japan is weighing a potential rate hike, while India is expected to cut its rates. This mix of signals shows that while the immediate crisis may be over, the path forward for the global economy remains uncertain.
