The European Central Bank announced a quarter-point interest rate cut on Thursday, marking the second reduction to the deposit rate this year.
This anticipated decision follows a period of lackluster economic growth within the euro zone and declining inflation, which approached the central bank’s 2 percent target in August.
Market speculation, future rate decisions
For many in the market, the key question was not whether the ECB would lower rates in September, but whether the bank would offer any insights into its future plans.
Economists are divided on whether ECB policymakers will opt for a pause during their next meeting on October 17, similar to their approach in July, before possibly implementing another quarter-point cut on Dec. 12.
The ECB’s meeting comes just days ahead of the Federal Reserve, which seems ready to initiate its own cycle of rate cuts.
The European Central Bank announced that it would not commit to a specific interest rate trajectory for the upcoming months, even as investors anticipate further monetary policy easing by year-end.
The European Central Bank indicated that the Governing Council would maintain a data-driven and meeting-by-meeting approach to determine the appropriate level and duration of restrictions. They noted that interest rate decisions would be informed by an assessment of the inflation outlook, considering incoming economic and financial data, underlying inflation dynamics, and the effectiveness of monetary policy transmission. Additionally, they emphasized that the Governing Council would not pre-commit to a specific rate path.
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