ECB cuts interest rates as growth dwindles

 The European Central Bank cut interest rates again on Thursday (September 12).

It lowered its deposit rate by 25 basis points to 3.50% in a widely predicted move.

It made the cut as inflation slowed and economic growth faltered.

ECB President Christine Lagarde:

"Based on our updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to take another step in moderating the degree of monetary policy restriction."

It follows up on a similar cut in June as inflation is now close to its 2% target and the domestic economy is skirting a recession.

Investor attention has already shifted to what comes next.

But the ECB gave no clues to its next step, even as market watchers bet on steady policy easing in the months ahead.

"Our interest rate decisions will be based on our assessment of 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."

More dovish ECB policymakers have argued recession risks are rising and high ECB rates are now restricting growth far more than needed.

But inflation-wary hawks are still in a majority, and they believe the labor market remains too hot for the ECB to sit back.

They also argue underlying price pressures raise the risk inflation could surge again.

Inflation is still only seen back at target in the second half of next year.

That means few policymakers will likely argue against further easing, but the key divide is how quickly the ECB should move.

Investors are also divided.

Another cut by December is fully priced into financial markets but some also see a chance of an interim move in October.

https://finance.yahoo.com/video/european-central-bank-cuts-interest-142912676.html