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The ECB plans another rate cut


September, 05 2024
watermark Economic news

The European Central Bank plans to reduce the deposit rate by 25 basis points at a meeting to be held on September 12. According to most economists, this will not be the last rate cut this year — it will be cut again in December.


The rate cut was made possible by slowing inflation to a 3-year low in August and cooling wage growth. The median forecast of economists showed that the probability of a recession in the next two years is only 30%. Almost 85% of economists predict a reduction in the deposit rate next week and another decrease in December to 3.25%.


A cautious approach to lowering the rate seems appropriate, given the expected acceleration of inflation by the end of the year and its retention above the ECB's target level of 2% until at least the second half of 2025. Markets estimate the probability of a rate cut by the US Federal Reserve by more than 100 bps this year. Most economists in a separate survey predicted a 25bp rate cut at each of the three remaining meetings.


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Foreign exchange trading carries a high risk of losing money due to leverage and may not be suitable for all investors. Before deciding to invest your money, you should carefully consider all the features associated with Forex, as well as your investment objectives, level of experience, and risk tolerance.