Subscribe here: [ Ссылка ] What is a little bit irritating sometimes is the lapse of time between meetings. And on this occasion there were only five weeks. But in those five weeks we received quite a lot of information, some of it by way of hard numbers and readings that were actually updated downwards a little bit today, and some of it by way of PMIs, which are a bit softer than hard data, but all synchronised and moving in the same direction. So were we surprised? I’m not sure that we had anticipated that 1.7% [inflation], nor did anyone else for that matter. Because if I look at analysts and if I look at those whose job it is to project and to forecast, or markets, I think we were all a little bit surprised by the acceleration that is being demonstrated by that number.
But it’s certainly raised our confidence that the disinflationary process is well on track. But having said that, we are data dependent. And that’s the beauty of the English language: data are either singular or plural, but it’s the same word. We are not data point dependent. So it’s not because HICP came out at 1.7% or core at 2.7% that we made that decision. We need an array of information and data. And, by the way, we also know for instance, based on the work that has been done and that was already mentioned during the previous press conference in September, on the basis of projections, that the next three months will not have this linear low and below-target inflation number. We know that it will be higher than that because of obvious base effects that we know of already. And we shouldn’t be surprised by that, and we should not be jumping to any kind of conclusions either.
The European Central Bank has intervened to prevent a sharp slowdown in the eurozone economy with its first back-to-back interest rate cut since the euro crisis in 2011.
With Germany on the brink of a recession and inflation tumbling across the 20 member single currency bloc, the ECB followed a reduction in the cost of borrowing at its previous meeting in September with a further 0.25 percentage point cut in its key deposit rate to 3.25%.
Marking the third interest rate cut this year, the ECB’s president, Christine Lagarde, said the fall in inflation had surprised the central bank and meant a cut was needed to ensure a soft landing for the eurozone economy.
Figures out earlier on Thursday revealed annual prices growth in the eurozone had eased in September to 1.7%, down from 2.2% the previous month.
Lagarde said there were clear signs from most measures of business and consumer activity that the economy was weakening.
Growth in France is expected to wane after a bounce during the Olympics while Italy’s better than expected recovery from the inflation shock of the last two years has petered out. Only Spain has shown a degree of resilience while interest rates have remained high, increasing by 0.8% in the second quarter of the year.
Earlier this month, an measure of factory output in the eurozone – the HCOB Manufacturing PMI – fell to a nine-month low in September, adding to a downturn lasting more than two years.
Lagarde said: “The latest data is all heading in the same direction, downwards, and points to more sluggish growth.”
She refused to indicate whether there would be further rate cuts, saying the central bank would remain dependent on the data before making further cuts at its next meeting in December.
The ECB’s move puts it two ahead of the Bank of England, which is widely forecast to cut the cost of borrowing in the UK by 0.25 percentage points from the current level of 5% when its monetary policy committee meets next month.
In the US, the Federal Reserve has indicated it is also minded to trim rates in the coming months after instituting its first reduction last month – a half-point cut.
Gold reached a record high just before Thursday’s ECB announcement, hitting $2,688.82 (£2,065.26) an ounce for the first time, lifted by forecasts of interest rate cuts around the world and uncertainty ahead of next month’s US election.
Announcing its decision, the ECB said the reduction in interest rates was based on “an updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission”.
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