The European Central Bank (ECB) went on with a second consecutive interest rate cut for the first time since 2011, in a bid to cope with a projected slowdown in the eurozone.
The ECB cut a further 0.25% to the deposit rate, pushing it to 3.25%. It is the third interest rate cut of 2024. ECB’s president Christine Lagarde didn’t confirm a further cut in the next meeting in December but said that they will keep monitoring data before making any decision.
In the press statement announcing the cut, the ECB said that the decision was taken after “an updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission.”
For her part, Lagarde said that the cut was needed after a surprising drop in inflation in order to help the eurozone economy. The most recent figures on inflation saw a drop in September to 1.7%, down from 2.2% of the previous month.
Overall, Lagarde and the ECB expects eurozone economies to stop growing, with only Spain still on a positive curve. France is bouncing down after an Olympic-related growth, while Italy’s surprise growth is waning. Moreover, Germany is on the brink of recession and heading for a second year of shrinking economy, dragging down most of the eurozone.
The ECB’s interest rate cut will most likely not be isolated. The Bank of England is also expected to cut its interest rate in November, while the US Federal Reserve has already made a reduction and hinted at further cuts in the coming months.
