For years, central bank watchers expected that the October meeting would be somewhat dull. However, the current mixture of slowing growthAnd higher inflationThis could lead to it being more dramatic than anticipated.

Although big decisions on the future of the European Central Bank’s emergency stimulus package — the Pandemic Emergency Purchase Program — are unlikely to be revealed until December, investor interest will be focused on comments made by bank President Christine Lagarde in this Thursday’s press conference.

Spyros Adrapoulos, senior European economist with BNP Paribas stated that there is potential for the ECB “to continue its pushback on current market prices in its communications at this meeting.”

“We expect Christine Lagarde, on the other hand of pushing back against price fixing, to also maintain that this current surge in inflation is mostly temporary.”

Multiple adverse economic shocks are currently affecting the euro area economy. Supply chain bottlenecksAll kinds of goods have been in short supply. gas prices are at record highs. The market anticipates a central bank rate rise at the beginning of 2022 despite these uncertainty.

“The market will want to know if President Lagarde is speaking.” You can find more information here “ECB Chief Economist Lane argues that market timings of liftoff are inconsistent with new guidance,” Mark Wall, chief economist at Deutsche Bank writes.

Philip Lane, ECB Chief Economics Officer, raised concerns about whether interest rates could rise by the end of next fiscal year. The central bank said that it would not lift rates until inflation is below 2% in the medium-term.

Lane, Reuters, stated at an event that it was difficult for some markets to see the future market price of the forward rate curve.

Inflation in the Eurozone reached a thirteen-year high last September. This was mainly due to higher fuel prices, higher car prices and higher accommodation costs.

“While there has been an increase in the prices of ‘accommodation’, it should not be taken as such. [a]Dirk Schumacher wrote in a note for clients, “catch up” prices increase is reflected supply side bottlenecks.”

The September numbers provide some tentative evidence that the catch-up part of inflation may be temporary and is therefore only temporary. However, the price pressure resulting from bottlenecks has not diminished.

Any indications of a change in the ECB’s view on the cause of this current inflation spike will be closely watched by investors. The persistent narrative so far has been “the current increase in inflation is expected to be largely temporaryLagarde in September stated that “underlying price pressures are increasing only slowly.” Any changes to this assessment could have a significant market impact as they would also imply a more hawkish tone within the bank’s Governing Board.

In order to keep the unwarranted tightening in financial conditions from occurring, most economists have so far opted for a more dovish stance by the ECB. This is because the Euro zone’s recovery is slowing.