The European Central Bank (ECB) has lowered its key interest rate by 0.25%, bringing it down to 3.25%, as economic growth in the Eurozone slows and inflation falls short of expectations. This adjustment comes as policymakers ramp up efforts to support the region’s economic recovery.
At a recent press conference, ECB President Christine Lagarde confirmed the move, emphasizing that the disinflation process is progressing as anticipated. She pointed to various economic indicators that suggest inflationary pressures are diminishing, giving the ECB more confidence to adjust its policy stance.
Despite the unanimous decision to cut rates, Lagarde dismissed any discussion of a larger reduction, such as the half-point cut enacted by the U.S. Federal Reserve earlier this year. She also reassured that the Eurozone is not heading into a recession, despite concerns over Germany’s economic slowdown.
This marks the ECB’s first consecutive rate cut in over 13 years, and market analysts expect further reductions in the coming months. Dean Turner, chief economist at UBS Global Wealth Management, anticipates additional cuts before year-end, with rates possibly dropping to 2% by mid-2024.
While the ECB continues to monitor high domestic inflation and gradual wage growth, the Governing Council remains committed to a data-driven approach, making policy decisions on a meeting-by-meeting basis.
