The European Central Bank is expected to further reduce the deposit rate by 25 basis points to 3.25% at its meeting on Thursday, October 17, following the reduction of inflation to 1.8% in the Eurozone in September. combined with the weakening of its economy.
This is the third reduction in interest rates by the ECB this year and the second in a row, after the one in September, while markets also consider their reduction certain in October and December, although they see it continuing in 2025.
The ECB has made it clear that monetary policy decisions will be taken at each meeting based on available data, wanting to have freedom of movement depending on the path of inflation towards the 2% medium-term target, whilst taking into account the course of the economy .
Although inflation is expected to rise in the last quarter of the year because fuel prices will compare to last year’s low levels, unlike in previous months, it is now clear that it is moving towards the target.
Bank of Greece Governor Giannis Stournaras told the Financial Times that the target will likely be reached from the first quarter of 2025, earlier than predicted by the ECB in September. For this reason, Mr Stournaras was in favor of reducing interest rates by 25 bp. both in October and at the next meeting in December, although I would be in favor of continuing to reduce them in 2025, as long as the de-escalation of price increases continues.
To increase confidence in meeting the inflation target, which will be taken into account at the next meeting, the president of the central bank, Christine Lagarde, addressed the European Parliament, in turn predicting a possible reduction in interest rates next Thursday- fair. .
The slow course of the economy makes a more rapid easing of the ECB’s monetary policy even more imperative. After a 0.3% increase in eurozone GDP in the first quarter of 2024, this slowed in the second quarter to 0.2%, while the S&P Global Momentum Survey showed that private economic activity slowed slightly in September.
For the first time, in fact, since the beginning of the year, the three main economies of the region – Germany, France and Italy – operated in conditions of contraction of the private economy.