Market News Update: ECB Interest Rates, FX and Natural Gas!

ECB Interest Rate

It is largely anticipated by economists that the European Central Bank (ECB) will declare a pause on Thursday, maintaining the 4% deposit rate and maintaining the refinancing operations lending rate at 4.5%.

Markets are speculating that ECB President Christine Lagarde will convey a hawkish message during the press conference, which would fuel expectations for an interest rate hike in December, even in the event of a stable interest rate decision. The Eurozone’s inflation outlook is at danger due to a renewed geopolitical threat stemming from the military situation between Israel and Hamas. This could make it challenging for the central bank to meet its 2.0% objective by the end of 2025, as previously predicted. The region is directly impacted by rising oil and gas prices amid intensifying Middle East tensions, given that it is a net importer of energy.

What are Interest Rates?

Financial institutions impose interest rates on loans to borrowers, which they then pay to savers and depositors in the form of interest. Base lending rates, which are determined by central banks in reaction to shifts in the economy, have an impact on them. The primary responsibility of central banks is to maintain price stability, which often entails setting a target core inflation rate of 2%.

In an effort to encourage lending and strengthen the economy, the central bank may lower base lending rates if inflation drops below its objective. In an effort to combat inflation, the central bank typically raises base lending rates when inflation increases significantly above 2%.

Natural Gas Update

Natural Gas prices jump to $3.42 as tension builds around possible invasion. Following speculation and now official confirmation that Israel is prepared to launch its ground attack, Natural Gas has recovered. Israel has made plans and is arranging troops and supplies, even in the face of repeated visits from a range of international leaders who have requested more time to establish a human passage. This implies that the risk premium that was previously priced out during the last several days needs to be factored in once more, which could cause petrol prices to soar back up to $3.60 and possibly even higher. 


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