The European Central Bank (ECB) reported a decrease in inflation to 2.4% in February, down from 2.5% in January. This easing of inflation supports the case for another interest rate cut, but leaves room for debate on how far the central bank will lower borrowing costs. The ECB is expected to cut its benchmark rate by a quarter point to 2.5% on Thursday.
The drop in energy prices and major economy France’s low inflation rate of 0.9% contributed to the decrease. This supports the view that the ECB is succeeding in controlling inflation, allowing it to focus on supporting economic growth.
However, concerns about growth remain due to the stagnated eurozone economy and cautious consumer spending habits. The recent surveys of purchasing managers by S&P Global suggested a barely positive economic growth in February.
The upcoming interest rate meeting will determine how far the ECB will cut rates. Will President Christine Lagarde provide clues on future rate cuts? Some indicators, such as costs for services, remain elevated at 3.7%.
Isabel Schnabel, an ECB official, recently argued that recent changes in the economy may constrain rate cuts. The neutral rate, at which the economy is neither stimulated nor held back, has increased over the years.
Source: https://apnews.com/article/eurozone-inflation-ecb-europe-economy-cb555f0a040aed0c505d957769d96e9a