A second rate cut in Europe and one next week for the US – the pace of central bank policy easings is accelerating.
The European Central Bank (ECB) on Thursday delivered on expectations for a 0.25% trim for the second time in a couple of months.
That set the ECB’s key policy rate at 3.5$.
But it is not cutting into a solid performing economy with inflation falling – which is what the Fed will be doing next week.
The latest cut from the ECB follows slowing demand, weak levels of activity – especially in German – which have helped push down inflation.
The weakening pace of activity saw the ECB lower its 2024 growth forecast to 0.8%, down slightly from an earlier projection of 0.9%, citing “weaker contribution from domestic demand over the next few quarters.”
And, further cuts? Undecided with no guidance, unlike after the first cut.
The ECB’s Governing Council said in a statement that it “is not pre-committing to a particular rate path,” while reaffirming the need to take a data-dependent and meeting-by-meeting approach.
Economists are split over whether policymakers at the ECB will look to pause when they meet again on October 17, as they had done in July before potentially reducing rates by another quarter-point in December.