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  • Writer's pictureRealFacts Editorial Team

European Central Bank Decides To Cut Interest Rates


European Central Bank sign

The European Central Bank cut rates this past week for the first time since the Covid-19 pandemic. This wasn’t a total shocker as it has been largely expected for the last few months, the ECB brought rates down a quarter-point to the level of 3.75%. This comes right on the heels of the Canadian central bank cutting rates just a few days prior, and some Scandinavian countries cutting rates earlier this year. Although this is a great sign, the board of the ECB has announced that this isn’t indicative of further rate cuts to come, it was a one time move that will have to be evaluated on a day-to-day basis. They said that the future will be “data dependent” and they are “not pre-committing to a particular rate path”.

 

This is good news but Europe is still struggling with inflation (albeit not as badly as America is) while also seeing growth, not a good recipe for continued rate cuts. There is also another issue that may arise from an aggressive rate cut approach from the ECB, Brian Swint of Barron’s writes, “Another concern for the ECB is that if it gets too far ahead of the Fed in lowering rates, it could weaken the euro against an already strong dollar. While that could boost European exports by making them cheaper to overseas buyers, there’s also a risk that it would add to inflation and could cause some financial instability.”

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