By Francesco Canepa and Balazs Koranyi

FRANKFURT (Reuters) – Policy doves at the European Central Bank are preparing to advocate for an interest rate cut next month following a series of disappointing economic data, according to seven sources.

Although ECB policymakers initially viewed a rate cut on October 17 as unlikely after recent cuts due to weakened growth forecasts and expectations for falling inflation over the upcoming year, the latest euro zone business surveys and German sentiment data have strengthened the doves’ case for a cut.

In addition, a significant slowdown in wage growth and decreasing energy costs have prompted fears that inflation targets may not be met for an extended period.

However, any proposal to lower rates is expected to encounter significant resistance from hawks, who argue that economic surveys do not always reflect actual conditions as strongly as concrete indicators like GDP.

Some sources have mentioned the possibility of keeping rates steady in October, accompanied by a strong signal of a potential December cut, contingent on subsequent data improvements, although this would contradict the ECB’s current approach of evaluating each meeting individually.

An ECB spokesperson declined to comment on these speculations.

With the decision coming in three weeks and critical data, including September’s inflation numbers, pending, the outcome remains uncertain. Some policymakers who could sway the vote have not yet made firm decisions.

Hawks emphasize reliance on hard data, such as wage and GDP figures, which will only be available by the December meeting. While few have outright ruled out an October cut, ECB member Peter Kazimir has stated publicly that the central bank would likely wait until December to make further decisions.

Traders have increasingly favored an October cut, adjusting expectations after the recent weak data. Money market prices now reflect a 50-60% chance of a 25 basis point reduction in the deposit rate to 3.25%, up from a 35% probability a week ago.

Paul Hollingsworth, chief Europe economist at BNP Paribas, noted that the September PMI data indicates a fragile recovery in the euro zone, with the softening price pressures leading ECB doves to advocate for an October cut.

HSBC economists anticipate that the ECB will continually reduce interest rates by 25 basis points at each meeting from October through next April, while Societe Generale economist Anatoli Annenkov suggests proactively implementing cuts may be warranted.