12 September 2024
If you are covering the ECB's latest interest rate decision, please see the following comment from Lindsay James, investment strategist at Quilter Investors:
“The European Central Bank has confirmed its second 25bps interest rate cut of the year, a move that had long been priced in by markets following further proof that inflation has subsided while economic growth has been sluggish.
“Eurozone harmonised inflation fell to 2.2% in August from 2.6% in July, while growth in the second quarter was revised down to 0.2% from 0.3% - a slowdown compared to the 0.3% achieved in the first quarter. Meanwhile, signals from consumer and business surveys have been mixed. Manufacturing has continued to struggle, but the service sector has started to signal improving conditions.
“Given it is faced with an economy in desperate need of some form of stimulus, the ECB will be hoping this second quarter point rate cut will begin to make easier financial conditions felt. Today’s news is sure to provide some relief to consumers and businesses which could help the continent on its way towards an improved economic recovery, but whether the ECB can cut rates again this year remains to be seen.
“The ECB has much less wiggle room than other central banks, so although a further cut in October is not entirely off the cards, the ECB will as always remain heavily reliant on the data that comes out between now and then. Ensuring inflation continues to head in the right direction, and particularly making more of a dent in core inflation, will be top of its agenda.
“All eyes will now turn to the Federal Reserve and the Bank of England to see if they follow suit with rate cuts of their own next week, though it is looking decidedly more likely in the US than the UK.”
