(Bloomberg) -- European Central Bank Governing Council members aren’t yet in a position to rule out an interest-rate cut at their next decision on Oct. 17 even if such a move is unlikely, according to people familiar with the matter.
Given the downside risks to economic growth in the euro zone, officials would rather keep open the option to lower borrowing costs at that meeting, said the people who declined to be identified discussing confidential matters.
With just five weeks to go until that policy gathering, ECB officials will only have one new inflation reading by then, and President Christine Lagarde observed on Thursday that the decline anticipated for that September print will then reverse. To judge any downturn in the economy, policymakers will need to rely on purchasing manager indexes, rather than much hard data.
Following the ECB chief’s press conference, investors reduced their bets on a move next month. They now see a 20% likelihood of such a step, compared with 40% earlier this week.
The ECB has now cut rates twice — in June and September — and markets are currently betting on at least one more reduction by the end of the year. Given officials’ preference for using their quarterly economic forecasts to guide them on policy moves, December might appear the more logical moment to act.
Asked on prospects for the October meeting, Lagarde didn’t offer specific guidance on the likelihood of a move, citing the ECB’s commitment to decide on the basis of data.
An ECB spokesperson declined to comment.
--With assistance from Constantine Courcoulas.
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