PREVIOUS TRADING DAY EVENTS 26 Oct 2023

The European Central Bank ECB left interest rates unchanged as expected on Thursday, ending an unprecedented streak of 10 consecutive rate hikes. The ECB promised a pause last month as recordhigh borrowing costs had a heavy effect on business conditions and the economy in that region.

Inflation is significantly lower than last year, while the economy has slowed so much that a recession may be underway, making further hikes unlikely.

The ECB President Christine Lagarde kept a further rise in rates on the table as a distant possibility.

We have to be steady, Lagarde told a news conference in Athens, where the ECB held its policy meeting for the first time in 15 years. The fact that we are holding doesnt mean to say that we will never hike again. Sometimes inaction is action. A decision to hold is meaningful, she said, adding that it was taken unanimously.

Markets now see a high chance the ECB will start cutting interest rates in April and fully price in a move by June, followed by two other cuts before the end of the year.

The economy is likely to remain weak for the remainder of this year, said Lagarde. But as inflation falls further, household real incomes recover and the demand for euro area exports picks up, the economy should strengthen over the coming years.

Source httpswww.reuters.commarketsratesbondsecbholdratesmaydiscussquickerbondportfoliorunoff20231025

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