Latest Developments on the Eurozone Economic Agenda

Key developments regarding the Eurozone economy include JPMorgan's expectation of a half-point rate cut by the European Central Bank (ECB) in December due to a weak economy, and German Chancellor Scholz's proposal for a large investment fund to modernize the country. Meanwhile, Moody's has downgraded Hungary's credit rating outlook to negative.

ECB Rate Cut Expectations JPMorgan Chase (JPM) expects the ECB to lower interest rates by half a point in December due to slowing economic activity. The bank had previously anticipated that policymakers would need to wait until January. However, in light of recent PMI data declines, slowing service inflation, and trade uncertainties, it reported that a December cut is now seen as more likely. This expectation has also impacted money market traders. Following JPMorgan's report, the probability of the ECB making a 50 basis point rate cut in December was raised from 10% to 20%. These developments indicate increasing pressure on policymakers.

Major Investment Proposal for Germany German Chancellor Olaf Scholz proposed the creation of an investment fund worth at least 100 billion euros to accelerate the modernization of the country. Scholz expressed this proposal at a Social Democratic Party event, stating that the fund should be supported by both state resources and private sector investments. The fund will be utilized in critical areas such as energy infrastructure and housing construction, and it can be increased later. The Chancellor's proposal underscores Germany's need for economic growth and infrastructure investment. The reaction from political and economic circles in Germany to this proposal remains to be seen, with high expectations regarding how the fund will contribute to heavy industry and infrastructure projects.

Hungary's Credit Rating Outlook "Negative" Moody's Ratings has updated Hungary's credit rating outlook to "negative." The rationale for this decision is Hungary's weak governance structure, which poses risks to the grants and low-cost loans received from the European Union. The country's credit rating remains at Baa2, but the shift to a negative outlook could affect future borrowing conditions. Moody's analysts highlighted that Hungary's opportunity to increase economic growth and improve fiscal criteria through EU funds is at risk. Past examples demonstrate the contribution of such funds to the national economy. Analysts warn that Hungary's failure to meet the necessary requirements for the release of EU funds could have negative impacts on economic growth and fiscal sustainability.