In an effort to boost the Eurozone’s weak growth, the European Central Bank, or ECB, has lowered its benchmark interest rate for the second consecutive meeting. The rate was set at 3.25%, a drop of 0.25 percentage points from the previous 3.5%. The decision widens the gap between the borrowing costs of the ECB and the Fed (Federal Reserve), the central bank of the United States.
According to the European Central Bank, the decision was made after “an updated assessment of the inflation outlook, underlying inflation dynamics, and the strength of monetary policy transmission.” The deflationary process is well under way, according to newly available inflation data. In addition, recent negative surprises in economic activity indicators have an impact on the inflation outlook,” it stated.
Weak growth is currently being experienced by Europe. The European economy began the summer of the northern hemisphere with signs of slowing down, following a brief recovery at the start of the year. Specifically, Germany has not changed since the Covid-19 pandemic began in 2020.
September’s inflation rate for the euro zone was 1.7%, which is less than the ECB’s target of 2%. At a press conference, ECB President Christine Lagarde hinted that additional interest rate reductions might be required if economic growth keeps slowing down.
The markets anticipate that the ECB will lower interest rates once more at its December meeting. It is anticipated that the rate will rise to three percent. Regarding 2025, no agreement has been reached. Investors speculate that the rate may reach 2%. 2.5% is a more likely number, according to some economists.
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