Alex Trelinski
THE European Central Bank(ECB) cut interest rates on Thursday by a quarter of a point to 4.25%.
The June reduction had been widely expected but is still a long way off from almost zero per cent which was the situation in July 2022.
The rate hikes were about ‘cooling down’ the economy and reducing inflation which had reached double digits in EU member countries.
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Analysts expect perhaps two more interest rate reductions this year, assuming there is no rebound in inflation, and those will be needed to make any significant dents for monthly home mortgage repayments.
“We are not pre-committing to a particular rate path,” ECB President Christine Lagarde told a news conference.
“Despite the progress over recent quarters, domestic price pressures remain strong as wage growth is elevated, and inflation is likely to stay above target well into next year.”
Asked if the ECB was moving into a phase of ‘dialling back’ its tight monetary policy stance, Lagarde said she could not confirm such a process was underway, but that there was ‘a strong likelihood’.
“But it will be data-dependent, and what is very uncertain is the speed at which we travel and the time that it will take,” she added, noting there would be ‘bumps on the road’ ahead.
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