Written by PAN PYLAS

The European Central Bank, which sets interest rates for the 20 countries that use the euro currency, does not expect the bloc to slide into recession as it cut borrowing costs once again Thursday in the wake of recent data showing inflation across the bloc falling to its lowest level in more than three years, and economic growth waning.

The bank’s rate-setting council lowered its benchmark rate from 3.5% to 3.25% — its third reduction since June — at a meeting in Llubljana, Slovenia, rather than its usual Frankfurt, Germany, headquarters, and said the “disinflationary process is well on track.”

According to revised figures on Thursday, inflation across the 20-country eurozone, sank to 1.7% in September, the first time in three years that it has been below the ECB’s target rate of 2%.

In a statement accompanying the decision, the ECB predicted an inflation pick-up in the coming months, before a return to its target in the course of next year.

In a press briefing following the decision, ECB President Christine Lagarde gave few signals that the bank would be cutting interest rates again at the next policy meeting in December, stressing that the governing council is “not pre-committing to a particular rate path.”

She insisted that decisions will “follow a data-dependent and meeting-by-meeting approach.”

The European Central Bank stands at right as soccer players practise on a field next to the river Main, in Frankfurt, Germany, late Thursday, Sept. 19, 2024. (Photo via AP Photo/Michael Probst.)

Lagarde did acknowledge that the recent data on economic activity had come in “somewhat weaker than expected,” pointing to a contraction in manufacturing sector and weaker exports. Even though Germany, Europe’s powerhouse economy, saw output shrink in the second quarter, albeit by 0.1%, Lagarde said that she she didn’t expect the eurozone economy overall to fall into recession.

“On the basis of the information that we have, we certainly do not see a recession,” she said.

Economists think mounting evidence of an economic slowdown in the eurozone, particularly in Germany, will pile pressure on rate-setters to consider another cut to help bolster growth by making it even cheaper for businesses and consumers to borrow. In the second quarter of the year, the eurozone expanded by a modest quarterly rate of 0.2%.

“The trends in the real economy and inflation support the case for lower rates,” said Holger Schmieding, chief economist at Berenberg Bank.

The ECB, which was created in 1999 when the euro currency was born, started raising interest rates in the summer of 2021, taking them up to a r ecord high of 4% in Sept. 2023 to get a grip on inflation by making it more expensive for businesses and consumers to borrow, but that has come at a cost by weighing on growth.

One reason why inflation has fallen around the world — it’s down at 2.4% in the U.S. and 1.7% in the U.K. — is that central banks dramatically increased borrowing costs from near zero during the coronavirus pandemic when prices started to shoot up, first as a result of supply chain issues built up and then because of Russia’s full-scale invasion of Ukraine in early 2022, which pushed up energy costs.

Other central banks, such as the U.S. Federal Reserve, have also started to cut interest rates as inflation rates have fallen.

 

Related Stories
‹
As Markets Implode, US Trading Partners Puzzle Over Whether There’s Room for Negotiations
The impact of U.S. President Donald Trump’s blast of tariff hikes was reverberating across world markets Monday as America’s trading partners puzzled over whether there is room for negotiating better deals.
Sweeping Trump Tariffs Draw Dismay and Calls for Talks From Countries Around the Globe
Sweeping new tariffs announced by U.S. President Donald Trump provoked dismay, threats of countermeasures and urgent calls around the globe.
As the Causes of US Inflation Grow, so Do the Dangers
Written by CHRISTOPHER RUGABER What keeps driving inflation so high? The answer, it seems, is nearly everything. Supply chain snarls and parts shortages inflated the cost of factory goods when the economy rocketed out of the pandemic recession two years ago. Then it was a surge in consumer spending fueled by federal stimulus checks. Then Russia’s invasion […]
Russian Drones Force Europe To Defend Itself, Perhaps Alone, After Putin ‘Put Down a Marker’ to NATO
The flight of multiple Russian drones over Poland this week marks a clear escalation, experts say. NATO responded with overwhelming force.
A Summit and Parade in China May Signal a Geopolitical Shift. They Might Also Be Political Jockeying
The leaders of China, North Korea and Russia stood shoulder to shoulder Wednesday as high-tech military hardware and thousands of marching soldiers filled the streets of Beijing.
On the Porch: Ellen Brown - Myths about Money
This Week: Ellen Brown is an attorney and author of thirteen books and hundreds of articles (all on her blog at http://EllenBrown.com). Her titles include the bestselling "Web of Debt" and "Nature's Pharmacy," co-authored with Dr. Lynne Walker, along with "The Public Bank Solution" and her latest book "Banking on the People."  She graduated from UC Berkeley in 1967 and from UCLA Law School in 1977; practiced law for ten years in Los Angeles; then spent 11 years abroad, in Kenya, Honduras, Guatemala and Nicaragua, with her husband and two children. She co-founded and chaired of the Public Banking Institute from which she retired in Spring of 2025 
How the US-EU Trade Deal Wards Off More Escalation but Will Raise Prices and Slow Growth
Written by DAVID MCHUGH, SAM McNEIL and SAMUEL PETREQUIN FRANKFURT, Germany (AP) — U.S. President Donald Trump and European Commission President Ursula von der Leyen have announced a sweeping trade deal that imposes 15% tariffs on most European goods, warding off Trump’s threat of a 30% rate if no deal had been reached by Aug. 1. The tariffs, or import taxes, paid […]
More Than 300 Charged in $14.6 Billion Health Care Fraud Schemes Takedown, Justice Department Says
State and federal prosecutors have charged more than 320 people and uncovered nearly $15 billion in false claims in what they described Monday as the largest coordinated takedown of health care fraud schemes in Justice Department history.
North Carolina Revenue Predictions Fall with Recession Risk
State officials have lowered anticipated revenue collection, largely over rising economic uncertainty and the risks of a U.S. recession.
Europe Launches a Drive To Attract Scientists and Researchers After Trump Freezes US Funding
The European Union launched a drive to attract American scientists and researchers to Europe with offers of grants and new policy plans.
›