He ECB The Fed cut its deposit rate by 25 basis points to 3.5% in a widely anticipated move, following a similar reduction in June, as inflation is now close to its 2% target and the domestic economy is on the verge of recession.
With the cut widely expected, investors’ attention has already shifted to what happens next, but the ECB offered no indication, sticking to its guidance that decisions will be made on a meeting-by-meeting basis, without committing in advance to a specific path for rates.
“The Governing Council will continue to follow a data-dependent, meeting-by-meeting approach to determine the appropriate level and duration of restrictions,” the ECB said in a statement. “The Governing Council is not pre-committed to a particular rate path.”
Investors’ attention now turns to ECB President Christine Lagarde’s press conference, where she will be asked about the outlook for rates and how expected rate cuts by the US Federal Reserve could influence the ECB.
ECB and inflation in the Eurozone: what the market is looking at
Economists think the most he will do is leave open the possibility of another cut in October, saying all meetings, including the next one, are “up for grabs.”
“The inflation “Domestic inflation remains high as wages are still rising at a high pace,” the ECB said. “However, labour cost pressures are moderating, and profits are partially cushioning the impact of higher wages on inflation.”
More flexible policymakers, mainly from the south of the eurozone, have been arguing that recession risks are increasing and that high interest rates are ECB They are now restricting growth much more than necessary, increasing the risk that inflation could fall below target.
But inflation-concerned hawks, still in the majority, argue that the labour market remains too tight for the ECB to ease, and that underlying price pressures, as evidenced by stubbornly high costs in services, raise the risk of inflation taking off again.
Source: Ambito
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