Subscribe here: [ Ссылка ] ECB President Lagarde delivered a downbeat assessment of the outlook for the Euro Area economy yesterday. Lagarde warned that growth momentum was slowing, and that the recovery in activity had been weaker than expected.
The European Central Bank (ECB) has lowered its three key interest rates by 25 basis points, with a focus on the deposit facility rate. This decision reflects the ECB’s updated assessment of inflation, underlying price dynamics, and the effectiveness of monetary policy transmission. The Governing Council emphasizes its commitment to achieving a 2% medium-term inflation target, using a data-driven, meeting-by-meeting approach.
Discover what this decision means for the economy, financial markets, and monetary policy. Join us as we break down the ECB's latest move and its potential impact.
Lagarde said that firms were holding back investment, while also saying that exports had been weak. There was also a nod to the downside risks posed by the prospect of greater trade restrictions under the second Trump administration.
The European Central Bank (ECB) has decided to lower its three key interest rates by 25 basis points, aiming to support economic growth and stabilize inflation at its 2% medium-term target. In this video, we break down the key takeaways from the Governing Council's decision, including updated inflation projections, economic recovery forecasts, and the impact on wages, borrowing, and domestic demand. Learn how the ECB's policies are shaping the economic landscape for 2024 and beyond.
This is seen leading to softer growth next year (0.7% vs. 0.8%), while the 2025 and 2026 forecasts were also downgraded to 1.1% and 1.4% (from 1.3% and 1.5%). At the same time, the view on core inflation was left unrevised.
A combination of weaker growth, particularly under the threat of hefty tariffs from the Trump administration next year, and still above target inflation in the underlying index, is not a particularly encouraging combination. If anything, this can only open the door to further aggressive interest rate cuts from the ECB in the coming months.
The ECB opened the door for further cuts as it watered down language about needing to keep rates ‘restrictive’, and warned of a darkening outlook. It comes as the US Federal Reserve is set for a rate cut next week.
The Bank of England has been more cautious, despite low inflation, and traders see only a one in ten chance that the Bank will cut rates next week.
ECB move came as Germany and France, Europe’s two biggest economies, battle weak growth and political instability.
In France, prime minister Michel Barnier was forced out in a no-confidence vote. And Europe is likely to be badly affected if Donald Trump imposes swingeing tariffs on imports.
The ECB expects growth for the eurozone of 0.7 per cent this year, revised down from 0.8 per cent. and 1.1 per cent on 2025, revised from 1.3 per cent.
ECB president Christine Lagarde said efforts to bring down inflation – now 2.3 per cent – were bearing fruit but it foresaw ‘a slower economic recovery’ amid ‘uncertainty... in abundance’.
Key points covered:
ECB’s interest rate cut explained
Inflation outlook and monetary policy strategy
Implications for economic growth and stability
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