Would you like to receive notifications on latest updates of the following headlines?

European central bank cuts interest rates amid sluggish growth

POSTED ON September 13, 2024 •   GLOBAL NEWS      BY Abiodun Saheed Omodara
European Central Bank (ECB) president Christine Lagarde l Credit: AFP

The European Central Bank (ECB) on Thursday cut interest rates by a quarter percentage point to 3.5% in response to falling Eurozone inflation and signs that the bloc’s economy risks grinding to a halt.

The decision came while ECB president Christine Lagarde warned that the recovery is continuing to face some headwinds.

She said Thursday’s decision to lower the benchmark deposit rate for the second time this year was “unanimously decided.”

The decision also comes less than a week before the Federal Reserve is widely tipped to begin loosening US monetary policy. The Bank of England, which has reduced rates once so far, meets a day later.

Experts forecast that the ECB will likely lower interest rates again in its upcoming two meetings this year.

The ECB cut once in June and then hit pause in July before going on summer break in August.

The rate-setting council led by Lagarde has to juggle concerns about a disappointing outlook for growth against – which argues for cuts – against the need to make sure inflation is going to reach the bank’s 2% target and stay there – which would support keeping rates higher for a bit longer.

Inflation in the 20 countries that use the euro currency fell to 2.2% in August, not far from the ECB’s 2% target, down from 10.6% at its peak in October 2022.

At her post-decision news conference, Lagarde said recent data had confirmed “our confidence that we are heading towards our target in a timely manner.”

Following Lagarde’s comments, the performance of euro to US Dollar rose about 0.27%, selling at 1.1041.

ECB Staff see headline inflation averaging 2.5% in 2024, 2.2% in 2025 and 1.9% in 2026, as in the June projections.

Also, inflation is expected to rise again in the latter part of this year, partly because previous sharp falls in energy prices will drop out of the annual rates.

“Inflation should then decline towards our target over the second half of next year,” Lagarde said.

However, she declined to detail the bank's future rate-cutting path, only saying that decisions would be made “meeting by meeting” based on economic data, without committing to a fixed rate path.

Lagarde said, “We are determined to ensure that inflation returns to our two per cent medium-term target in a timely manner. We will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim.”

She added that the ECB board will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction.

“In particular, our interest rate decisions will be based on our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission. We are not pre-committing to a particular rate path,” the ECB President said.

Wage Growth

Lagarde said negotiated wage growth will remain high and volatile in 2025. However, overall labor costs are slowing, and the growth of compensation per employee is expected to markedly slow again next year.

She said staff expect unit labor cost growth to continue declining over the projection horizon owing to lower wage growth and a recovery in productivity.

Finally, profits are continuing to partially offset the inflationary effects of higher labor costs.

Lagarde noted that the labor market remains resilient. The unemployment rate was broadly unchanged in July, at 6.4%. At the same time, employment growth slowed to 0.2% in the second quarter, from 0.3% in the first.

Recent survey indicators point to a further moderation in demand for labor, and the job vacancy rate has fallen closer to pre-pandemic levels, the ECB president said.

According to survey indicators, Lagarde said the recovery is continuing to face some headwinds.

“We expect the recovery to strengthen over time, as rising real incomes allow households to consume more. The gradually fading effects of restrictive monetary policy should support consumption and investment,” she said.

ECB staff project that the economy will grow by 0.8% in 2024, rising to 1.3% in 2025 and 1.5% in 2026. This is a slight downward revision compared with the June projections, mainly owing to a weaker contribution from domestic demand over the next few quarters.

READ ALSO
NLC Decries Nigeria's Poor Labor Rights Record as National Disgrace
BY Abiodun Saheed Omodara July 17, 2025 0

The Nigeria Labour Congress (NLC) has expressed its worries about the nation's inadequate performanc...

READ ALSO
Israeli Strike Hits Catholic Church in Gaza, Killing Two Civilians
BY Abiodun Saheed Omodara July 17, 2025 0

An Israeli airstrike on Gaza's sole Catholic Church resulted in the deaths of two individuals on Thu...

READ ALSO
FG Denies Emergence of New Terrorist Groups Amid Turkish Warnings
BY Abiodun Saheed Omodara July 17, 2025 0

The Federal Government On Wednesday, stated that no new terrorist groups have emerged in the country...

READ ALSO
Nation Mourns: Tears Flow at the Funeral of Former President Muhammadu Buhari
BY Abiodun Saheed Omodara July 16, 2025 0

Tears streamed down faces at the funeral for the late former president, Muhammadu Buhari, as his bod...

READ ALSO
SERAP files Lawsuit against NNPCL over Missing $2.5bn, N825bn for Refinery Rehabilitation
BY Abiodun Saheed Omodara July 13, 2025 0

SERAP files lawsuit against NNPCL over missing $2.5bn and N825bn earmarked for refinery rehabilitati...

READ ALSO
Accord Party Calls for Abolishment of State Electoral Commissions to Restore Election Integrity
BY Abiodun Saheed Omodara July 13, 2025 0

The Accord Party has emphasized the necessity for the National Assembly to eliminate the State Indep...

READ ALSO
Tinubu Returns to Abuja after Successful Diplomatic Missions in Saint Lucia and Brazil
BY Abiodun Saheed Omodara July 13, 2025 0

ABUJA, Nigeria - President Bola Tinubu returned to Abuja late Saturday following official trips to S...

READ ALSO
Nigerian Man Sentenced to 11 Years for $1.3 Million COVID-19 Fraud
BY Abiodun Saheed Omodara July 12, 2025 0

A Nigerian man residing in the San Gabriel Valley, Abiola Femi Quadri, received a sentence of 135 mo...

OUR CHANNELS:

Obama’s Debunk Report on Divorce
BY Abiodun Saheed Omodara July 18, 2025 0

Former U.S. President Barack Obama and his wife, Michelle, have put to rest rumors regarding their m...


Bayelsa Govt. Cautions Principal Officers on Pension Delay
BY Abiodun Saheed Omodara July 18, 2025 0

The Bayelsa State Government has cautioned principal officers of local government councils to avoid...


NLC Decries Nigeria's Poor Labor Rights Record as National Disgrace
BY Abiodun Saheed Omodara July 18, 2025 0

The Nigeria Labour Congress (NLC) has expressed its worries about the nation's inadequate performanc...


Israeli Strike Hits Catholic Church in Gaza, Killing Two Civilians
BY Abiodun Saheed Omodara July 18, 2025 0

An Israeli airstrike on Gaza's sole Catholic Church resulted in the deaths of two individuals on Thu...


SSC Napoli Completes €25 Million Deal for Noa Lang from PSV
BY Abiodun Saheed Omodara July 17, 2025 0

Serie A champions Napoli confirmed on Thursday that they have signed Dutch forward Noa Lang from PSV...


Civil Defence Board Temporarily Closes Recruitment Portal for System Enhancements
BY Abiodun Saheed Omodara July 17, 2025 0

The Civil Defence, Correctional, Fire and Immigration Services Board has temporarily closed its recr...


Nigeria Should Aim for 60,000 Megawatts of Power Generation- Dangote
BY Abiodun Saheed Omodara July 18, 2025 0

President of the Dangote Group, Alhaji Aliko Dangote, argues that Nigeria's low electricity generati...


FG Denies Emergence of New Terrorist Groups Amid Turkish Warnings
BY Abiodun Saheed Omodara July 17, 2025 0

The Federal Government On Wednesday, stated that no new terrorist groups have emerged in the country...


151 Senior Police Officers Face Misconduct Hearings- NPF
BY Abiodun Saheed Omodara July 18, 2025 0

The Nigeria Police Force has revealed that 151 senior officers are currently undergoing proceedings...


CPC Loyalists Face Uncertain Future Amid Buhari's Death, Tinubu's Leadership
BY Abiodun Saheed Omodara July 18, 2025 0

The passing of former President Muhammadu Buhari has sparked renewed speculation regarding the polit...


More Articles

Load more...

Menu