✂️ ECB cuts rates amid faster inflation drop and slowing economy  ✂️📉

📌 The European Central Bank (ECB) has reduced interest rates for the third time this year, lowering the deposit rate to 3.25%, as inflation slows quicklier than expected. The ECB anticipates inflation control will be achieved next year, adjusting its forecast from the second half of 2025. While the exact timeline for future rate cuts remains unclear, the central bank stressed that rates will stay restrictive as long as needed to manage inflation.

📌 Despite the earlier optimism for economic growth, the region’s economy has slowed, with inflation dropping below 2% for the first time since 2021. ECB President Lagarde acknowledged downside risks to growth but maintained that a recession is unlikely, projecting a « soft landing » for the economy. Challenges include geopolitical risks and uncertainties around global trade, particularly regarding the Middle East and potential U.S. tariffs under Donald Trump’s presidency.

📌 Economic performance remains mixed across the eurozone, with strong demand in southern countries like Spain and Greece, while Germany’s economy lags due to weaker demand from key markets such as China. Some analysts predict the ECB may continue cutting rates into 2025, bringing the deposit rate to 2% by year-end, in line with estimates for a neutral monetary policy stance. However, inflation risks persist, particularly in the services sector, keeping the ECB cautious in its approach to monetary easing.

Source: Bloomberg