BNY Mellon forecasts an ECB rate pause in October as fiscal risks in France and sovereign debt concerns weigh on the central bank's policy trajectory.
The EURUSD pair faces downward pressure as BNY Mellon analyst Geoff Yu anticipates the European Central Bank will pause rate hikes in October and potentially conclude its tightening cycle for the remainder of the year. This outlook is driven by concerns over second-round inflation effects, rising sovereign risks, and fiscal uncertainty surrounding the French budget, which collectively signal a more dovish policy stance.
BNY Mellon cites clear guidance on second-round effects, sovereign risks, and French budget uncertainty as primary reasons for a potential pause.
The implementation of balance-sheet responses, such as ending quantitative tightening or utilizing the Transmission Protection Instrument, would likely mark the end of rate-based tightening.
BNY Mellon strategist Geoff Yu anticipates the European Central Bank will skip an October rate hike, signaling a potential end to the current tightening cycle. The outlook reflects concerns over emerging sovereign risks and fiscal instability in France, suggesting the ECB may pivot toward balance-sheet management tools instead.
The firm cites clear guidance on second-round inflation effects, rising sovereign risks, and fiscal uncertainty surrounding the French budget as reasons for the ECB to end its tightening cycle.