Maps
Magazine

WORLD NEWS

European Central Bank Cuts Rates for the Third Time This Year Amid Economic Concerns
The ECB has cut interest rates for the third time in 2024, signaling a shift from fighting inflation to safeguarding economic growth. What does this mean for the euro zone's future?
ND
by News Desk
2024-10-17
European Central Bank Cuts Rates for the Third Time This Year Amid Economic Concerns

On Thursday, the European Central Bank (ECB) announced a quarter-point cut in interest rates, marking the third reduction this year. This decision reflects growing confidence that inflation in the euro zone is under control while acknowledging a deteriorating economic outlook for the region. The latest cut represents the first consecutive reductions in interest rates in 13 years, signaling a significant shift in focus for the central bank—from combating inflation to protecting economic growth, which has lagged behind the United States for two consecutive years.
In a press conference following the announcement, ECB President Christine Lagarde stated, “We believe the disinflationary process is well on track,” citing recent data indicating lower-than-expected business activity and sentiment. This data likely influenced the ECB’s decision to lower rates, with inflation readings for September also coming in below expectations.
When asked about potential higher tariffs on European goods should Donald Trump win the upcoming U.S. presidential election, Lagarde noted that such trade barriers would pose a "downside" for Europe. “Any restriction, any uncertainty, any obstacles to trade matter for an economy like the European economy, which is very open,” she added, while also expressing the ECB's vigilance regarding oil price fluctuations linked to the ongoing Middle East conflict.
Despite the economic challenges, Lagarde emphasized that the ECB does not foresee an imminent recession. Instead, the bank remains optimistic about a "soft landing," indicating a scenario of reduced but still positive growth. Following this latest reduction, the deposit rate now stands at 3.25%, with money markets anticipating further cuts through March 2025.
While Lagarde refrained from providing specific guidance on future rate moves, she reiterated the ECB's commitment to making decisions "meeting by meeting" based on incoming economic data. Observers believe that easing inflationary pressures and downside risks to growth could lead to additional rate cuts beginning in December and continuing into 2025, aiming to return interest rates to a neutral level around 2%.
Following the announcement, the euro and euro bond yields showed little change, as the decision had been anticipated by market participants following comments from several ECB officials, including Lagarde.
Tagged:

EconomicGrowth

InterestRates

ECB
Share News: