ECB’s easing cycle is continuing, but pace is still uncertain -Lagarde

The European Central Bank (ECB) will continue cutting interest rates but the pace of rate cuts is yet to be determined, ECB President Christine Lagarde told Bloomberg TV on the sidelines of the IMF / World Bank meetings in Washington (watch, runtime: 29:11). Despite inflation moving in the right direction, other data including backward and forward-looking figures are also factored into decisions on the pace of monetary easing, Lagarde said.

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REMEMBER- The ECB trimmed interest rates last week for the third time this year as the central bank looks to curb potential for “downside surprises” in the eurozone economy. The move was the bank’s first back-to-back rate cut in 13 years, five weeks after a previous rate cut. The ECB’s monetary easing cycle comes amid decelerating inflation across the bloc and what could be the second straight year of contraction in Germany, the eurozone’s largest economy. Inflation dropped below the eurozone’s 2% target to 1.7% in September, its lowest level in three years.

The inflation outlook may look rosy, but the ECB is keeping a watchful eye: The ECB is confident the eurozone will reach its inflation target “on a sustainable basis” by 2025, Lagarde said, but called for attention for certain markers citing possible leeway in energy and services prices — which she deemed as lower “to where they could be.”

Other central banks are on the same wavelength, with the US Federal Reserve spearheading the global policy-easing cycle and cutting interest rates by half a percentage point in September. Meanwhile, a surprisingly upbeat US September jobs report has reinforced economists’ hopes that the Fed is on track to pull off a “soft landing.”

What the pundits think: Investors are putting their money on quarter-point reductions from the central bank’s next four meetings and deposit rates reaching 2% by mid-2025, according to Bloomberg. Money markets followed suit, increasing their expectations for rate cuts and loosening bets to a 32 bps cut in December — up from the previously forecasted 30 bps — and 58 bps by January — up from 56 bps. This shift suggests a 28% chance of a half-point rate cut in December, according to the business information service.

MARKETS THIS MORNING-

Early trading in Asia-Pacific markets is showing another mixed morning, with Japan’s Nikkei clawing its way back from losses earlier in the day to rise 0.4%. The Hang Seng Index and mainland China’s Shanghai Composite are both in the red.

Meanwhile, futures suggest Wall Street could continue to see selling pressure today, as Dow Jones futures remain firmly in the red after the index closed yesterday with its worst performance in over a month.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.5% yesterday on turnover of SAR 4.7 bn. The index is down 0.6% YTD.

In the green: Al Baha (+3.5%), UACC (+2.4%) and Spimaco (+2.2%).

In the red: East Pipes (-4.5%), Bupa Arabia (-3.5%) and Al Arabia (-3.1%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.1% yesterday on turnover of SAR 50.3 mn. The index is up 7.6% YTD.

In the green: Meyar (+7.3%), Keir (+5.7%) and Sama Water (+4.5%).

In the red: Paper Home (-8.9%), Rawasi (-4.2%) and Saudi Top (-4.1%)