The decline comes in the context of a process of price moderation, after the eurozone inflation rate fell for the third month in a row in September to 1.8% year-on-year, four-tenths lower than in August and the lowest level since April 2021.
This Thursday, the European Central Bank (ECB) cut interest rates for the second time in a row by 25 basis points, reaching its reference rate at 3.25%, reflecting the moderation of inflation and “the recent surprises” of economic activity.
The Governing Council, meeting in Ljubljana, Slovenia, cut the deposit rate – which compensates excess reserves and is the reference rate – for the third time so far this year to 3.25%.
Similarly, the main financing operations (OPF) – the weekly cash injections – and the credit facility – which lends overnight to banks – stood at 3.4% and 3.65% respectively.
In a statement, the ECB assured that the latest data show that the disinflation process is “continuing as planned” and that the outlook in this area has been “affected by the recent downward surprises in inflation indicators”.
The agency believes that internal inflation remains high as salaries continue to rise at a high pace, although it expects labor cost pressures to gradually ease.
The ECB, which expects inflation to rise in the coming months, has reiterated its intention to keep interest rates at sufficiently restrictive levels “for as long as necessary” to reach its 2% target.
In addition, it stated that it will continue to apply a data-dependent approach on a meeting-by-meeting basis “to determine the appropriate level of restriction and its duration.”
The ECB cut interest rates in a context where the price moderation process continues, after eurozone inflation fell for the third month in a row in September to an annual rate of 1.8%, four-tenths lower than in August and the lowest level since April 2021.
However, eurozone GDP grew by 0.2% in the second quarter of the year, a tenth less than in the first three months of 2024; while the government of Germany – the group’s main economy – last week revised its forecast for 2024 to a contraction of 0.2% and not to 0.3% growth as in April.
This is the second consecutive rate cut by the ECB, the third since the beginning of the year, leaving behind the quarterly decline momentum it had maintained until now, following the cuts in June and September.
Source: EITB
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.