of euro area The economy has performed weaker than expected, with the European Central Bank (E.C.B.) said it plans to assess the impact on consumer prices at its next meeting. E.C.B. Mr. Frank Elderson, Executive Director. In an interview with a Slovenian newspaper DerroAs reported by Bloomberg, Elderson said recent data shows that economic growth risks are materializing, and this will be a key factor in assessing the inflation outlook.
Elderson rarely speaks publicly about monetary policy, but at the meeting he emphasized the importance of open and thorough discussion. E.C.B.Meeting held in Slovenia on October 16-17. He said members were prepared to consider different perspectives and opinions. The meeting is expected to decide on lower borrowing costs, marking the third interest rate cut this year, as central bankers react to weak economic data and potential risks to the labor market.
of E.C.B. pointed out that inflation is slowing faster than expected, with September's data falling below the 2% target for the first time since 2021. E.C.B. President Christine Lagarde last week expressed confidence that the central bank would hit its inflation target on time and signaled further interest rate cuts. Similarly, France's central bank governor, François Villeroy de Galhau, suggested that further rate cuts were “very likely” at next week's meeting.
Prior to the meeting, Elderson emphasized: E.C.B.'s data-driven approach reaffirms that decisions are made on a case-by-case basis. He stressed that the central bank will continue to ease restrictive policies if inflation trends support the outlook for reaching the 2% target by the second half of 2025. However, he stressed the need for flexibility in the pace of future interest rate adjustments.
Despite the decline in overall inflation, service sector inflation remained high at 4% in September. Elderson predicted that services inflation would gradually slow next year. Nevertheless, he acknowledged that geopolitical tensions, such as the potential escalation of the situation in the Middle East, could impact energy prices and transport costs, leading to trade disruptions and upward pressure on prices.
Elderson also outlined other potential risks to inflation. He warned that higher-than-expected wage increases and higher profit margins could push prices higher. Conversely, inflation could come under downward pressure from factors such as weaker-than-expected demand or an unexpected economic downturn in the United States or other parts of the world.
Elderson pointed to domestic economic growth. euro area Currently it is below E.C.B.This is your prediction. He explained that a series of data shows that household consumption has declined and business investment levels are lower than initially expected. This divergence from expectations has led to the central bank taking a cautious stance as it prepares for next week's talks.
