Euro Zone to Get Hard Data on Tariff Damage as ECB Sets Rates

Economic Overview - The European Central Bank (ECB) has cut interest rates eight times in a year to achieve an inflation target of around 2% and is now prepared to address any sudden economic changes [1] - A rigorous economic health-check is scheduled to assess the impact of US tariffs on growth and inflation as policymakers meet to set interest rates [1] GDP and Economic Growth - The initial reading of the euro zone's gross domestic product (GDP) for the third quarter is expected to show a minimal expansion of 0.1%, consistent with the previous quarter [2][3] - National reports from major economies in the region will provide additional insights into economic performance [3] Inflation and Monetary Policy - October's inflation reading is anticipated to dip to 2.1% from 2.2% in the previous month, which will be crucial for the ECB's monetary policy decisions [4] - The ECB will also release its Bank Lending Survey to evaluate the effectiveness of monetary policy in the real economy [4] Economic Activity and Consumer Confidence - The first half of 2025 was marked by volatility, with initial growth followed by a contraction in Germany's output by 0.3% in the second quarter due to the impact of US tariffs [5] - Consumer confidence remains low despite a strong labor market, raising concerns about the anticipated recovery in private consumption [6] Investment and Future Outlook - There are risks that investment activity may only recover gradually due to weak domestic demand and low capacity utilization in the manufacturing sector [6] - The ECB is expected to maintain borrowing costs at 2% during its meeting in Florence, Italy, with forecasts suggesting a potential economic rebound towards the end of the year [7]