The European Central Bank (ECB) recently announced a reduction in reference interest rates by 25 basis points, marking the first decrease since 2019. This decision was made after assessing the inflation outlook, impact factors, and the strength of the monetary policy shift. Following nine months of unchanged interest rates, the ECB found it appropriate to reduce the tightening.
Despite existing inflationary pressures in the euro area, the ECB raised its inflation forecast for the year to 2.5% and for the following year to 2.2%. The cooling of prices in the eurozone compared to the high inflation experienced in 2022 can be attributed to falling fuel costs and supply chains returning to normal after the pandemic.
Europe, specifically the eurozone, is ahead of the US in reducing interest rates, with the US Federal Reserve (Fed) still hesitant to loosen policy due to increasing inflation rates. Analysts have raised concerns about the euro losing value if Europe lowers interest rates before the US, potentially dragging down the eurozone economy. However, ECB President Christine Lagarde assures that the ECB’s decisions are data-driven and not influenced by
