Frankfurt and London /
He European Central Bank (ECB) cut interest rates by a quarter point until 3.25 percentamid growing confidence that the inflation of the eurozone is weakening and growing concerns about the low economic growth.
The move took eurozone rates to their lowest point since May 2023 and came after a cut of the same size at the last meeting of the ECBheld in September.
The president of ECB, Christine Lagardesaid after the meeting that the disinflationary process is “on a very good path” and that all the data since the September vote “is going in the same direction: downward.”
That suggests price pressures may now be weaker than the central bank forecast last month, when it predicted the inflation would increase towards the end of the year but would reach its target of 2 percent at the end of 2025.
Lagarde He said support for the government council cut was unanimous, while recent data “certainly improved our confidence” that the central bank is on track to achieve its goal of 2 percent.
“We broke the neck of the inflation? “Not yet,” he said. Lagarde. “Are we in the process of breaking that neck? Yeah”.
He cutout of the rates Just five weeks after the previous move and with little additional economic data indicates that “the ECB should be much more concerned about the prospects of growth of the eurozone and the risk that inflation will not reach the target,” he said Carsten Brzeskiglobal macro director at ING.
The inflation in the eurozone fell to 1.7 percent in the year to September, sinking below 2 percent for the first time in more than three years.
He ECB said that the prospects of inflation They were also “affected by recent downward surprises in economic activity indicators.”
A person familiar with the governing council discussions told Financial Times that the “majority” of their 26 members believes that the chances of the growth and the inflation were less than expected.
But despite the disappointing growth news, Lagarde said that those responsible for setting the rates did not consider a recession in the eurozone as the most likely scenario. “We are seeing a soft landing,” he said.
He euro registered a drop of more than 2 percent against the dollar over the past month, as expectations grew that the ECB would cut rates faster than USA.
The Fed cut his interest rate in September for the first time in more than four years, cutting borrowing costs by half a point and signaling more reductions on the way.
own ECB gave little guidance on the future path of its monetary policy. He reiterated that he is taking “a data-driven, meeting-by-meeting approach” and that he is “not committing in advance to a track record of rates in particular”.
Although policymakers maintain they have not yet decided what they will do at their last meeting in 2024, traders are betting that the reductions in December and January They are almost a certainty.
In general, the operators of the markets swaps They expect another four or five quarter-point rate cuts by the middle of next year.
Akshay Singalhead of operations interest rates short-term at Citi, said the mention of Lagarde The fact that the decision to cut rates was unanimous was “the beginning” of the market’s expectations of cuts.
Frederik Ducrozethead of macroeconomic research at Pictet Wealth Managementsaid Lagarde “did not close the door on consecutive rate cuts,” but noted that more data will be available in December.
Others argued that a cut in October could represent a “pivot” toward a faster return to lower rates. “Although the ECB “continues to insist on data dependence, the path for further significant rate cuts in the coming months is clear,” he said. Ulrike Kastens, asset manager economist DWS of the Deutsche Bank.
He ECB began to cut the rates in June and the cost of indebtedness It has already reduced it three times. Thursday’s decision was made in Ljubljanaat the Slovenian central bank.
