London, Sept 12 (Alliance News): The European Central Bank (ECB) has lowered its benchmark interest rate to 3.5% from 3.75%, marking its second rate cut in recent months as it responds to slowing inflation and a faltering European economy.
This decision follows the ECB’s first rate cut in five years in June, with no change in July. Inflation dropped to 2.2% in August, nearing the ECB’s 2% target, while wage growth eased.
The ECB maintained its inflation forecast for the year at 2.5% but slightly reduced its economic growth outlook for the eurozone to 0.8% from 0.9%.
The ECB cited ongoing restrictive financing conditions and subdued economic activity, driven by weak private consumption and investment.
Despite avoiding recession last year, Europe’s economic recovery remains fragile, with Germany’s economy shrinking unexpectedly in the April-to-June quarter.
Recent improvements in the services sector, partly due to the Paris Olympic and Paralympic Games, may be short-lived. Surveys reveal persistent economic fragility across the euro area, with declining new orders, employment, and business confidence.
Investors await further guidance on interest rates from ECB President Christine Lagarde’s press conference.
Former ECB chief Mario Draghi has highlighted the region’s economic and productivity challenges, urging a significant increase in EU investment to enhance competitiveness and address declining economic shares.
