ECB continues reversal in interest rate policy


The European Central Bank (ECB) cut its key interest rate by 0.25 percentage points to 3.5 per cent on Thursday. This is the second cut this year, after the first marking a turnaround in its policy was announced in June. The key interest rate is now at its lowest level since June 2023. The press analyses what this means for Europe’s economy.


El País (ES) /

Too timid and too slow

El País criticises the ECB’s approach:

“Faced with two opposing vectors — rising inflation and falling growth — the ECB is being careful not to reveal which direction it will take in the coming months. ... Its caution is understandable after the mistake it made in its analysis of the inflation scenario following the global supply problems in 2021 and the energy crisis in 2022. ... However, this caution could lead it to make another mistake: namely ignore the weakness of the European economy, weighed down by the German downturn and significant decreases in private consumption and investments (partly due to the ECB’s own rigid stance). The Bank’s policy has been too tight for too long and its easing is now too timid and too slow.”

La Stampa (IT) /

Interest cuts alone not enough

Europe must not get caught up in the details, warns La Stampa:

“Yesterday’s sensible interest rate cuts by the ECB can do little to revitalise our economy. ... For Europeans to invest more and produce more, as Mario Draghi proposes, far more radical measures are needed. We are wasting time with trivial, short-sighted polemics. To grow more, we need institutions that are commensurate to the size of our continent. Perhaps with Unicredit and Commerzbank [the major Italian bank has increased its stake in Germany’s Commerzbank to nine percent] the time has finally come for a significant cross-border merger in the Eurozone, 22 years after the introduction of the single currency and twelve years after the decision in favour of a banking union.”

Stefano Lepri
Kauppalehti (FI) /

Businesses need planning security

An economic upturn takes time, Kauppalehti points out:

“The market estimates an average inflation rate of below two percent for the coming year. If this is the case, there is scope for monetary easing. ... The path to an interest rate where monetary policy no longer acts as a brake on economic activity may take some time. Market expectations are that the ECB will continue with quarterly interest rate cuts until the end of next year when the interest rate on deposits reaches two percent. ... There are many uncertainties, including in the geopolitical sphere. After a sudden and abrupt cycle of interest rate hikes, a predictable and orderly decline in interest rates would be the dearest wish of many economic players.”

Frankfurter Allgemeine Zeitung (DE) /

Too early to pop the champagne

The danger of inflation has not yet been averted, warns the Frankfurter Allgemeine Zeitung:

“At 4.2 percent, inflation in the service sector in particular was far from stable in August and rose compared to July. Among other things, higher wages are making themselves felt. There is also much to suggest that the particularly low inflation in August was more of an outlier than a trend. Purely technical factors such as statistical base effects played a role, especially for energy prices. This means that we can expect a slight rise in inflation rates in the coming months until the end of the year. In any case, we shouldn’t be too overjoyed about the low rates: after all, they are partly the result of the economic downturn.”

Christian Siedenbiedel

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