De Guindos, Lane And Schnabel Will ‘Heat Up’ The ECB Meeting

After a week in which the clear protagonist has been the inflation data in the United States and the euro zone, next week will be the star of the agenda of the most important events for the markets due to the speeches that several members will make of the European Central Bank (ECB), anticipating the meeting that will take place on October 27.

A few days in advance, Luis de Guindos, Vice President of the ECB, Philip Lane, Chief Economist of the institution, and Isabel Schnabel, member of the Governing Council of the body, will speak about the monetary policy of the euro zone, and it is possible that they will give some clue about the decision that the ECB could take in its meeting at the end of the month.

The decision that the ECB finally makes is one of the most important keys for investors. The pace of interest rate hikes by the agency may end up moving stock markets and fixed income in one direction or another.

The debate at this time is whether the Governing Council of the ECB will choose to raise rates aggressively, repeating, at least, a rise of 75 basis points, like the one carried out at the September meeting, or whether, for On the contrary, it will choose to reduce the pace of rate hikes, and will decide to return to the path of 50 basis points.

At the moment the market is pricing in a 70 basis point increase in the price of money, according to rate futures contracts, making it more likely, in the eyes of investors, that a 75 basis point rise will be repeated. This seems to be the yardstick of the markets ahead of the meeting: any increase higher than this, of 100 basis points, for example, could be considered an upside surprise, which, a priori, could lead investors to sell stocks and bonds for fear of a more aggressive tightening by the ECB.

On the contrary, if they finally choose to go up 50 basis points, investors could react positively, since the financial conditions for companies and families will not tighten as quickly as might be expected.

It must be remembered that the minutes of the last meeting of the ECB reflected a major concern on the part of the members of the organization, who fear that inflation has already run amok and that it will be especially difficult to bring it back into line. This could convince the Governing Council of the ECB of the need to take aggressive measures, and avoid falling short with the rate hike. The speeches of Luis de Guindos, Philip Lane and Isabel Schnabel will be key to collecting clues in one direction or another.

China to publish GDP data
Leaving aside the monetary policy of the eurozone, next week it will be important to monitor the publication of China’s GDP data for the third quarter of this year. The second largest economy in the world is having problems recently, with growth during the second quarter that remained at 0.4% year-on-year, well below the data of recent years, and the objective maintained by the Government of growing at a rate of 5.5% per year for this year.

The consensus of analysts believes that China will recover a certain cruising speed in its economic growth, since they point to an increase of 3.5% during the third quarter without reaching the target rate that Beijing wants.

Outside of China, on Tuesday the data on industrial production for September in the US will be known, for which experts expect a drop of 0.1% . It is a bittersweet perspective, since, although it continues to reflect deterioration, it is lower than the 0.2% that was published in the month of August.

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