With eurozone inflation dipping to 1.9%, below its 2% target, the European Central Bank has cut its main interest rate to 2% in a concerted effort to stimulate flagging economic growth. This marks the eighth quarter-point reduction in a year, highlighting the central bank’s immediate response to disinflationary pressures and economic slowdown.
The 20-member currency bloc has experienced a significant deceleration in economic activity, with particularly acute slowdowns observed in France, Germany, and Italy. The pessimistic forecasts for the upcoming year have intensified the pressure on the central bank to make borrowing more affordable and stimulate investment.
While acknowledging the detrimental effects of trade policies, the central bank also foresees some support from increased government investment in areas like defense. ECB President Christine Lagarde, while expressing caution, highlighted the resilience of the labor market and private sector balance sheets as key strengths.
