On Thursday, the European Central Bank lowered interest rates again due to slowing inflation and weakening economic growth. However, the bank did not give clear hints about its next steps, even though investors expect gradual policy easing in the coming months.
The ECB reduced its deposit rate by 25 basis points to 3.50%, following a similar cut in June. Inflation is close to the 2% target, and the economy is at risk of recession.
Investors are anticipating the next moves by the ECB, especially in light of the expected rate cuts by the U.S. Federal Reserve. However, ECB President Christine Lagarde stated that the bank is not committing to a specific rate path and will base decisions on data in each meeting.
Euro assets remained stable after the rate cut, as analysts observed the ECB’s cautious approach to future rate decisions.
Hawks in the ECB support quarterly rate cuts to stimulate growth, while doves argue that high rates could hinder economic growth by undershooting the inflation target.
The ECB’s adjustments aim to encourage lending between banks and pre-emptively adapt its operations as the economy evolves.
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