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    Bank of Canada to cut rates by 50 bps on Oct. 23; next move unclear: Reuters poll

    BENGALURU (Reuters) – The Bank of Canada will cut its overnight rate by 50 basis points on Oct. 23 as price pressures ease, according to two-thirds of economists polled by Reuters who however failed to reach a consensus on where rates would be two months from now.Headline inflation declined more than expected to 1.6% last month. Along with further signs of a slowing economy, financial market traders and most economists are convinced the BoC, which has already trimmed rates by a cumulative 75 basis points since early June, will go for a bigger 50 basis point cut next week. Governor Tiff Macklem said last month the Bank wants to keep inflation close to the center of the 1%–3% range and economic growth could weaken, raising expectations for faster reductions toward the neutral rate which neither restrains nor stimulates the economy.But persistently high shelter costs, sticky core inflation and an unexpected fall in the unemployment rate last month suggest it still could be a close call.Two-thirds of economists, 19 of 29, in a Oct. 15-17 Reuters poll forecast the Bank would cut rates by one half-percentage point to 3.75%. One expected a 50 basis point cut in an August survey.”There has been a lot of baseless on-and-off speculation around the BoC’s next move but it needed data to justify a call. We now have that. The BoC is likely to cut 50 bps next Wednesday…I’ll also argue while it’s our call, we disagree with upsizing,” said Derek Holt, head of capital markets economics at Scotiabank.”There is still the risk the BoC – which has surprised markets many times in the past – could opt for 25 bps…the Bank is at significant risk of unleashing inflationary forces.”Four of the big five Canadian banks predicted a half-point cut, with only TD expecting a quarter-point reduction.If realised, that would match a 50 bps Federal Reserve rate cut last month. But the U.S. central bank is now widely expected to move in 25 basis point increments as the economy remains resilient. The prospect of a bigger rate cut has led to a roughly 2% decline in the Canadian dollar against its U.S. counterpart since the start of the month.One-third of economists, 10, expected a 25 basis point cut next week.”Core inflation measures have largely evolved in line with the BoC’s projections for Q3, and the 2.3%/2.4% reading for CPI-median/trim will make it easier to look through September’s headline surprise if the Bank wants to continue at a 25 bps per meeting pace,” said Robert Both, Canadian macro strategist at TD Securities. “Still, the risk of a 50 bp cut has risen with inflation falling further below the 2.0% target, and next week’s BoC decision is looking increasingly like a coin toss.”There was no clear consensus what the central bank will do at the following meeting in December, the last of the year.While 10 of 29 economists expected the policy rate at 3.50% by year-end, nine predicted it to be 3.75% and another nine expected 3.25%. Only one said it would be 4.00%.Meanwhile, inflation was forecast to rise slightly over the coming quarters and remain around 2% until 2026, the poll found.The BoC will cut rates by 100 basis points next year, shallower than this year, poll medians showed.The economy likely grew 1.2% on an annualized basis last quarter, compared to 2.8% predicted by the BoC in July projections. It was expected to average 1.1% this year before bouncing back to 1.8% in 2025. The central bank will release updated economic forecasts next week too.(Other stories from the Reuters global economic poll) More

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    Euro steady as ECB cuts rates; US retail sales boost shares and dollar

    SINGAPORE/LONDON (Reuters) -The euro was pinned at an 11-week low on Thursday after the ECB cut rates by 25 basis points as expected, while European shares held onto gains on the back of better earnings both at home and from Taiwanese chipmaking giant TSMC. Also in the mix, U.S. retail sales beat expectations, providing a further boost to U.S. stocks and the dollar. The European Central Bank made its first back-to-back rate cut in 13 years, a tacit acknowledgement that inflation, now below 2%, could settle around its 2% target quicker than previously thought. With markets pricing another cut in December, the tone and guidance in the press conference will be closely watched. “In our view, this is unlikely to be the last cut from the ECB this year. Another cut is likely in December, and we expect this will be followed by a series of cuts at every meeting through to June next year,” said Dean Turner, chief euro zone economist, UBS Global Wealth ManagementThe euro was last down 0.2% at $1.0842, flat after the ECB decision, but falling after the U.S retail sales data. Germany’s 10-year government bond yield, the benchmark for the bloc, was last up 3 basis points at 2.21%, likewise little moved by the ECB and rising after the U.S. numbers. [GVD/EUR] Also weighing on the euro is the U.S. presidential election, which remains on a knife edge, according to the latest opinion polls. Republican Donald Trump’s tariff, tax and immigration policies are seen as inflationary, and thus negative for bonds and positive for the dollar, which was at an over two-month high on major peers. [FRX/] The U.S. 10-year Treasury yield was last up 2 bps at 4.04%. [US/] In share markets, Europe’s broad Stoxx 600 index was last up 0.8%, as a number of well-received earning updates helped the index to bounce back following a poor start to the week on disappointment over results from heavyweights ASML (AS:ASML) and LVMH. (EU) The impact of ASML’s earnings in particular were also tempered by results from Taiwan’s TSMC which beat market expectations, and said it expects revenue to rise sharply in the fourth quarter.That helped Nasdaq futures outperform. They were up 0.9%, outpacing a 0.5% gain in S&P 500 futures, and extending gains after U.S. retail sales data. The S&P 500 finished a whisker away from another closing record high on Wednesday. [.N] CHINA REAL ESTATEEarlier on Thursday, blue-chip share indexes in Hong Kong and mainland China each fell 1.1%, and are both now around 14% below their most recent peaks, as investors move aside to wait for more Chinese government spending and signs it is helping the economy. [.SS] Chinese real estate stocks fell 7.8%, reversing two days of gains. China’s housing minister on Thursday promised to improve builders’ access to funding for finishing thousands of projects.But there was no new gesture to excite markets about a meaningful revival for a sector where a crackdown on developers’ borrowing has set off a wave of defaults, while declining prices have shaken households’ faith in the asset class.”The briefing is mainly about implementing previously-announced policies, including some already in operation,” said Shi Jiangwei, analyst at Shanghai Minority Asset Management, disappointing investors expecting fresh stimulus. Australian shares also eased from a record high as mining stocks slipped and iron ore prices fell in Singapore. That also weighed on the Australian dollar which struggled to hold its gains from data showing net employment blew past forecasts. [AUD/]In commodity trading, Brent crude futures steadied at $74.35 a barrel after four sessions of losses. Industry data showed an unexpected drop in U.S. crude stockpiles last week. [O/R]Gold last traded at $2,680 an ounce. [GOL/] More

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    Instant view: ECB cuts key rates again

    The euro initially rose following the rate decision, but fell back following stronger-than-expected U.S. data. It was last trading 0.25% lower on the day at $1.0836, compared with $1.0863 just before the ECB announcement (EUR=EBS).Europe’s broad STOXX 600 index was last up 0.8% , while Germany’s 10-year government bond yield, the benchmark for the bloc, was last up 3 basis points at 2.21%, versus 2.197% previously. Yields move inversely to prices. COMMENTS: ROBERT FARAGO, HEAD OF STRATEGIC ASSET ALLOCATION AT HARGREAVES LANDSDOWN, UK:”Growth is so slow in Europe and inflation is back at target, it would be a surprise if they (the ECB) didn’t continue to cut.””I think in practice for European stocks, what matters more is what’s happening in the U.S., because in the U.S., the rate decision is more difficult, given that the economy remains very strong and core inflation remains potentially pretty sticky.””The U.S. is where we look for a surprise. I think the case for European rate cuts is pretty clear cut.””During the (ECB chief Christine Lagarde’s) speech, we’ll be focused on the stickiness of wage inflation, core inflation, service inflation.”DEAN TURNER, CHIEF EUROZONE ECONOMIST, UBS GLOBAL WEALTH MANAGEMENT, LONDON:”In our view, this is unlikely to be the last cut from the ECB this year. Another cut is likely in December, and we expect this will be followed by a series of cuts at every meeting through to June next year, with the deposit rate hitting 2% before the ECB reaches for the pause button.””In the equity market, small and mid-caps in the euro zone offer attractive value and should be one of the main beneficiaries of ECB rate cuts, in our view.””We expect the lower rates environment, together with the ongoing resilience in the U.S. economy to support cyclical currencies like the euro, which we expect to perform well against the U.S. dollar in the coming months.”ROBERTO MIALICH, FOREX STRATEGIST, UNICREDIT, MILAN:”The message is exactly what we had in mind. ECB cut rates and made it clear that they are still dependent on data.” SEEMA SHAH, CHIEF GLOBAL STRATEGIST, PRINCIPAL ASSET MANAGEMENT, LONDON:”It has become increasingly evident that gradual ECB monetary easing is insufficient and that back-to-back rate cuts are necessary.” “While the ECB has resisted providing forward guidance and President Lagarde will emphasise data dependence, it is unlikely that there will be such a turnaround in the data in the next month that the central bank can afford to stand pat in December.””And while inflation pressures may continue to trouble the Governing Council, the troubling state of the euro area economy suggests that the path forward is fairly clear.”CARSTEN BRZESKI, GLOBAL HEAD OF MACRO, ING, FRANKFURT:”The decision to cut rates only five weeks after the last cut and with only very few pieces of economic data since then, suggests that the ECB must have become much more concerned about the euro zone’s growth outlook and the risk of inflation undershooting the target. Interestingly, the official language in the ECB’s decision was almost unchanged from the September meeting.”MATTHEW LANDON, GLOBAL MARKET STRATEGIST, JPMORGAN PRIVATE BANK, LONDON:”The European Central Bank abandoned their quarterly cadence of cuts with a second consecutive 25 bps rate reduction. This appears to send a clear signal to the market that concerns within the Governing Council are shifting from inflation to growth. It is hard to disagree.””They didn’t give much away in terms of what to expect going forward. We expect to see sequential cuts into 2025 towards a terminal rate around 2%.””Faster cuts and slower growth should keep pressure on European assets. The euro in particular feels vulnerable, and has been one of our preferred shorts into the U.S. election. We’ve been anchoring on a $1.07-1.11 range on euro/dollar, but that could skew 3-4% lower if higher tariffs become a real possibility post-election.”MARK WALL, CHIEF EUROPEAN ECONOMIST, DEUTSCHE BANK, LONDON: “The cut is still significant in the sense that the ECB has accelerated the easing cycle with the back-to-back cut. At the same time, the ECB continues to avoid guidance and is not committing to a particular path for policy. This is sensible given the uncertainties that lie ahead.””Chances are that today’s decision represents a pivot point into a faster normalisation of monetary policy.”ARNE PETIMEZAS, DIRECTOR RESEARCH, AFS GROUP, AMSTERDAM:”ECB cuts rates by 25 bps expected. Inflation and economic assessment is stating the obvious, and contains no surprises.””However, I had expected the ECB would drop the ‘not on a particular rate path’ language from the statement and instead, acknowledge that we’re now in an easing cycle. After all, this is the third cut in four months.”MARCHEL ALEXANDROVICH, ECONOMIST, SALTMARSH ECONOMICS, LONDON:”The ECB lowers interest rates at consecutive meetings for the first time since 2011 and looks set to cut again in December.” “Even after today’s move, policy remains in restrictive territory. And with inflationary pressures easing, the Governing Council feels comfortable to nudge interest rates lower toward their neutral level.” More

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    ECB lowers rates to 3.25%

    Save over 65%$99 for your first yearFT newspaper delivered Monday-Saturday, plus FT Digital Edition delivered to your device Monday-Saturday.What’s included Weekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysis More

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    US retail sales increase solidly in September

    Retail sales rose 0.4% last month after an unrevised 0.1% gain in August, the Commerce Department’s Census Bureau said on Thursday. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, would rise 0.3%. Estimates ranged from no change to an increase of 0.8%. Signs of the economy’s resilience likely will not discourage the Federal Reserve from cutting interest rates again next month, but will cement expectations for a smaller 25-basis-point reduction in borrowing costs. The U.S. central bank embarked last month on its easing cycle with an unusually large half-percentage-point cut in its policy rate, lowering it to the 4.75%-5.00% range, amid growing concerns about the labor market. The Fed hiked rates by 525 basis points in 2022 and 2023 to curb inflation. Spending and the overall economy are being underpinned by solid income growth, ample savings as well as strong household balance sheets. Though labor market momentum has slowed, layoffs remain historically low, supporting wage gains.”As we have long argued, consumer spending, net hiring, and payroll income have been locked in a resilient and self-reinforcing virtuous cycle throughout this expansion, supercharged by gains in household wealth and labor supply,” said Jonathan Millar, senior U.S. economist at Barclays. “Durable deterioration in consumer spending would require something to meaningfully undermine this cycle, such as increased precaution by consumers that lifts the saving rate or reluctance to hire by businesses, despite solid demand.” Retail sales excluding automobiles, gasoline, building materials and food services increased 0.7% last month after an unrevised 0.3% rise in August. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Growth estimates for the third quarter are around a 3.2% annualized rate. The economy grew at a 3.0% pace in the second quarter. More

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    European shares stay elevated after ECB rate cut

    (Reuters) -European stocks held on to their gains on Thursday, after the European Central Bank delivered a widely expected 25-basis-point rate cut, even though it refrained from offering new clues about its next move.The continent-wide STOXX 600 index was up 0.7% at 1225 GMT, following a two-day decline.The ECB reduced its interest rates by 25 bps, following a similar-sized cut in September, which marked its first back-to-back rate cuts in 13 years. However, the central bank did not provide any indication about future moves in its statement and instead repeated its mantra that decisions will be data-dependent.This came in the face of money markets’ expectations of three further reductions through March 2025. Inflation in the euro zone is now increasingly under control and the economic outlook has worsened.”The outlook is pretty clear as well… With the growth so slow in Europe and inflation back to target, it would be a surprise if they didn’t continue to cut,” Robert Farago, head of head of strategic asset allocation at Hargreaves Landsdown said.Investor sentiment was already upbeat on the back of a slew of robust corporate earnings ahead of the monetary policy verdict.Finnish bank Nordea rose 6%, supporting a more than 1% rise in the bank index, after raising its forecast and announcing a new share buyback programme.Germany’s Sartorius rose 16%, topping the STOXX 600, after the pharmaceutical equipment supplier’s better-than-expected bio-processing order intake boosted its nine-month results.British pest control company Rentokil Initial rose 9% on plans to expand initiatives to increase organic growth in North America following higher group revenue growth.On the flip side, Mondi (LON:MNDI) dropped 6.5% after the British packaging company reported a lower third-quarter core profit, while Nokia (HE:NOKIA) fell 4.2% after its quarterly sales missed estimates. More

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    ECB cuts rates as expected, says well on track to tame inflation

    The ECB cut its deposit rate by 25 basis points to 3.25% as forecast in a Reuters poll of analysts, in a tacit acknowledgement that inflation, now below 2%, could settle around its 2% target quicker than previously thought.But the bank gave no new clues about its next move, even if markets expect similar cuts at each of its next three meetings, taking the rate from a level where it restricts growth to at least a neutral setting by the end of next year.”The incoming information on inflation shows that the disinflationary process is well on track,” the ECB said in a statement. “The inflation outlook is also affected by recent downside surprises in indicators of economic activity.” A cut was widely expected after policymakers made the case for quicker policy easing in the run-up to the meeting on a series of weak growth readings and benign inflation data.Poor sentiment indicators, weak consumer spending and a prolonged industrial recession suggest that the bloc is barely growing, which will put downward pressure on inflation, which slowed to 1.7% last month, its lowest level in three years.”Domestic inflation remains high, as wages are still rising at an elevated pace. At the same time, labour cost pressures are set to continue easing gradually, with profits partially buffering their impact on inflation,” the ECB added.But policy hawks are still likely to oppose quick rate cuts given that inflation could tick up in the coming months. The labour market remains tight, unions continue to demand big wage increases, energy costs are volatile and services prices are still rising quickly, all of which suggests domestic inflation could remain relatively high for some time to come. However, doves argue that growth is now so weak that unless the ECB acted quickly to shore up the bloc, inflation could actually fall below target and the ECB would have to go from fighting rapid price growth to excessively low inflation. This debate is unlikely to have been settled on Thursday so ECB President Christine Lagarde may well offer no commitments and few clues about any future policy moves at her 1245 GMT news conference. More

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    ECB cuts interest rates to 3.25%

    It is the first back-to-back borrowing cost drawdown in 13 years, and serves as a sign that the ECB has begun to pivot away from a period of interest rate hikes designed to quell elevated price growth.Instead, the ECB has signaled that it is refocusing policy on trying to reinvigorate a sputtering Eurozone economy that has struggled to keep pace with the US for much of the last two years.Business activity and sentiment surveys out of the region undershot estimates in September. Meanwhile, an updated inflation reading released ahead of the ECB’s announcement showed that headline consumer price growth decelerated to an annualized 1.7% last month. The mark, which was initially 1.8%, is below the central bank’s stated 2% target.”The incoming information on inflation shows that the disinflationary process is well on track. The inflation outlook is also affected by recent downside surprises in indicators of economic activity,” the ECB said in a statement.The 25-basis point cut brings the rate the ECB pays out to banks for their deposits to 3.25%, widening the gap compared to the Federal Reserve. The US central bank lowered its target rate by an outsized 50 basis points last month to a range of 4.75% to 5.00%.Meanwhile, policymakers chose to avoid laying out specific policy guidance, reiterating that it is not “pre-committing to a particular rate path” and would roll out future decisions based on its “assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission.”The stance was “sensible” given the uncertainties that face the Eurozone economy, according to Mark Wall, Chief European Economist at Deutsche Bank.However, Wall added: “[C]hances are that today’s decision represents a pivot point into a faster normalisation of monetary policy.”In a note to clients, analysts at Capital Economics said they anticipate that upcoming economic data will support quarter-point cuts at “each of the next few meetings, at the very least.”Following the ECB’s announcement, which had been widely anticipated by markets, the euro was trading roughly unchanged versus the dollar. More