FRANKFURT: As the euro zone economy struggles due to domestic political unrest and the prospect of a new US trade war, the European Central Bank lowered interest rates Thursday for the fourth time this year while leaving the door open for further easing.
Since concerns about inflation have mostly subsided, the ECB has been swiftly loosening policy for months. Now, the focus is on whether it is lowering rates quickly enough to help a struggling economy that has been avoiding a recession for more than a year and is lagging behind its international counterparts.
Concerned by this bleak picture and what ECB President Christine Lagarde called “uncertainty … in abundance,” some officials even advocated for a larger rate decrease of half a percentage point to protect the euro zone economy.
However, they reached a unanimous agreement on 25 basis points, according to Lagarde, bringing the ECB’s deposit rate—which serves as the standard for borrowing costs within the 20-nation currency bloc—down to 3 percent.
Economists interpreted the central bank’s removal of an earlier reference in its guideline to maintaining interest rates at a level that is adequately restrictive as a warning that more policy easing is imminent, maybe as early as January, given that inflation is expected to stabilize at the ECB’s 2 percent objective in early 2025.
At a press conference, Lagarde stated, “The disinflation process is well on track.” “The element that has changed is the downside risk, especially the more complex downside risk to growth.”
