The monetary institution announced a new rate cut as inflation slows significantly in the euro zone and fears of an economic slowdown are growing.
As expected, the European Central Bank announced a further rate cut of 0.25 percentage points on Thursday. A decision motivated by the clear slowdown in inflation and the fear of an economic slowdown within the euro zone. This is the second consecutive rate cut decided by the ECB, unheard of in 13 years.
The ECB’s deposit rate, which serves as a reference for credit conditions in the economy, thus increases to 3.25%.
The Eco Duel: Rate cuts, the ECB will accelerate – 17/10
The disinflation process “is on track”, fueled by a sluggish economy, but the institution will continue to adopt a “data-based” approach to decide, “meeting by meeting”, on the evolution of rates, indicates the ECB.
Inflation below 2%
Inflation in the euro zone slowed more than expected in September, to 1.7% year-on-year, compared to a first estimate of 1.8%, Eurostat announced on Thursday. This is the first time since the summer of 2021 that it has fallen below the 2% threshold, the objective set by the ECB.
Started in June 2024, the cycle of ECB rate cuts comes after several successive increases decided in the wake of the post-Covid recovery then the war in Ukraine which caused energy prices to soar. This policy succeeded in curbing inflation but caused a sharp slowdown in economic growth.
