Policymakers from both the U.S. Federal Reserve and the European Central Bank have grounds for optimism as they head into the final stretch of their fight against inflation for 2023. Economic data on Friday showed that the euro zone’s core inflation rate ran at its slowest pace this year. Hours later, the Federal Reserve’s preferred inflation gauge was shown to rise at its slowest pace since 2020.
Both Fed Chair Jerome Powell and ECB President Christine Lagarde are set to speak in the upcoming week, with investors expecting them to exhibit optimism about the recent signs that inflation is cooling. The recent figures are expected to play a role in convincing the Federal Reserve to refrain from hiking rates in November. The same policy loosening is expected from the ECB.
“The ECB has probably finished raising interest rates,” Bloomberg Economics assumed. “Numerous measures of underlying price increases are falling, surveys are pointing to a significant deterioration in activity, and credit extension is weaker than it was in the depth of the euro crisis. However, the ECB will still need a long time to have sufficient confidence to lower rates.”