The European Central Bank (ECB) has cut interest rates for the second time in a row for the first time since 2011 to combat an expected economic slowdown in the eurozone.
The ECB cut deposit interest rates by another 0.25 percentage points, raising them to 3.25%. The third interest rate cut will be in 2024. ECB President Christine Lagarde The bank did not confirm further rate cuts at its next meeting in December, but said it would continue to monitor data before making a decision.
In a press statement announcing the rate cut, the ECB said the decision was taken after an “up-to-date assessment of the inflation outlook, underlying inflation trends and the strength of monetary policy spillovers.”
Lagarde said the rate cut was necessary to support the euro zone economy after inflation fell unexpectedly. The latest statistics on inflation showed that the rate of inflation was 1.7% in September, down from 2.2% the previous month.
Overall, Lagarde and the ECB expect the eurozone economy to stop growing, with only Spain still on a positive curve. While France is rebounding after Olympic-related growth, Italy's impressive growth is fading. Moreover, Germany is on the brink of recession, heading into its second year of economic contraction, dragging down much of the euro zone.
The ECB is unlikely to cut interest rates on its own. The Bank of England is also expected to cut interest rates in November, while the US Federal Reserve has already cut interest rates and has signaled further cuts in the coming months.
