Brussels – The latest information on inflation indicates that “the disinflationary process is well underway,” as the last Eurostat data shows. For this reason, the governing council of the European Central Bank opted for a new interest rate cut of 0.25 per cent. An easing of restrictive policies that follows the one already decreed in September, and now (actually effective October 23, ed) the interest rate on deposits with the central bank falls to 3.25 per cent, the rate on main refinancing operations rises to 3.40 per cent, and the interest rate on marginal lending operations drops to 3.65 per cent.
Christine Lagarde reiterates that in the ECB, of which she is president, “we are not bound to a particular rate path“, and that this is why forthcoming decisions will continue to be taken, as they have been up to now, on the basis of the available data and reflections on the “transmission force of economic policy” on the real economy. She does not prejudge the future. “I am not promising anything about the next decisions; in December, we will evaluate,” she says in reference to the next meeting of the Governing Council (December 12). A further cut of 0.25 per cent could also be opted for, but it all depends on the proof of facts.
Of course, for the moment, things are going even better than expected. Eurozone inflation at 1.7 per cent is “the lowest figure since April 2021”, Lagarde points out. At the same time, “downside risks remain” to growth and uncertainties that could affect inflation developments, mainly related to geopolitical turmoil and trade tensions. For this reason, a relaxation of monetary policy restrictions will be gradual. “Interest rates will be kept at sufficiently restrictive levels as long as necessary” to return to the reference target of 2 per cent.
The ECB says it is ready and willing to be vigilant and do what is necessary and calls on policymakers to act similarly. In particular, states are urged to make the reforms agreed upon along the path of the new stability pact. “Implementing the revised EU economic governance framework fully, transparently, and without delay will help governments to reduce budget deficits and debt ratios in a lasting way,” Lagarde emphasises. Therefore, “governments should now make a strong start in this direction in their medium-term plans for fiscal and structural policies”.
There is also some guidance for the European Commission, grappling with a tariff war against China. “Trade is an important element” for growth forecasts and inflation impacts, the European Central Bank President premised. “Every restriction and every barrier matters for an economy like the European one, which is open to the rest of the world.” In that sense, “every barrier to the possibility of doing trade with the rest of the world is a disadvantage,” especially in a general context where “we do not see recessionary conditions.”
English version by the Translation Service of Withub
