The European Central Bank (ECB) has made a landmark decision to cut interest rates again, the first time it has done so consecutively since the 2011 eurozone crisis.
While Germany teeters on the brink of recession, inflation rates across the 20-nation bloc are falling. Now, the ECB has chosen to cut interest rates by a further quarter of a percentage point, to 3.25 percent.
This is the third rate cut this year, with the previous rate cut to 3.5% taking place in September.
ECB President Christine Lagarde said the recent interest rate cuts were due to an unexpectedly sharp drop in inflation.
Inflation fell from 2.2% to 1.7% from August to September, faster than the ECB expected.
Lagarde said there were clear signs that the eurozone was weakening. The excitement surrounding the Olympics in France has slowed, and the economies of Italy and Spain appear to be in the doldrums.
Meanwhile, Germany is facing a recession amid domestic political turmoil. In fact, Berlin may be on the brink of a second consecutive recession for the first time in 20 years.
“The latest statistics are all in the same direction – down, pointing to a further slowdown in growth,” Lagarde said.
In making the announcement, the ECB said the rate cut was based on “the latest assessment of the inflation outlook, underlying inflation trends and the strength of monetary policy spillovers.”
In the UK, the Bank of England is expected to cut interest rates by 5% to 0.25% at its November board meeting.
