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The European Central Bank lowers the interest rate to 3.5%

2024-09-12 18:35:00, Kosova & Bota CNA

The European Central Bank lowers the interest rate to 3.5%

The European Central Bank has reduced the base interest rate by 0.25 percentage points, going down to 3.5%. However, the financial institution warned that "inflation is expected to rise again in the latter part" of 2024.

The European Central Bank (ECB) lowered interest rates by 0.25 percentage points on Thursday.

The Frankfurt-based financial institution cut its key deposit rate to 3.5%, in line with expectations, providing further relief for eurozone households and businesses.

"Recent inflation data has been in line with expectations," the ECB said in a statement.

But the bank warned that the road ahead would not be smooth, saying that "inflation is expected to rise again in the latter part of this year, partly due to the effect of energy prices".

After raising interest rates at a record pace from mid-2022 to combat rising consumer prices, the ECB has started to ease pressure as the inflation rate has fallen.

The bank had cut its deposit rate to 3.75% in June.

Growth and inflation in the eurozone

The rate-setting council, led by ECB president Christine Lagarde, must balance concerns about a disappointing growth outlook with the need for inflation to reach and stay within the bank's 2% target.

Inflation in the 20-member eurozone fell to 2.2% in August from 2.6% in July, after peaking at 10.6% in October 2022.

Consumer prices rose after Russia cut off most natural gas supplies to Europe following its full-scale invasion of Ukraine in February 2022, driving up utility bills.

The recovery from the COVID pandemic also led to shortages in the supply of raw materials, further fueling inflation, which then spread to services. The ECB and the US Federal Reserve responded with rapid interest rate hikes.

The Fed is also expected to make a first cut in its benchmark rate from a 23-year high of 5.25% to 5.5% at its September 17-18 meeting./DW





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