ECB's Strategic Shift: From Inflation Control to Growth Protection

The European Central Bank cut interest rates for the third time this year, reflecting a shift from focusing on inflation control to supporting economic growth. Despite this, the ECB remains vigilant about potential challenges from trade tariffs and oil price changes while acknowledging structural problems like high energy costs hindering Europe's competitiveness.

The European Central Bank (ECB) has implemented its third interest rate cut this year, targeting economic growth as inflation stabilizes. This marks the first consecutive rate cut in 13 years, highlighting a strategic shift from prioritizing inflation control to addressing Europe's lagging economic expansion compared to the United States.

ECB President Christine Lagarde expressed confidence in the disinflationary process, noting recent economic data supporting this trend. However, persistent concerns loom over potential trade barriers and volatile oil prices, which could adversely affect the European economy's open nature, particularly if geopolitical tensions spike.

The ECB's latest quarter-point reduction lowers the rate on banks' deposits to 3.25%, signaling commitment to supporting growth amidst structural challenges. While inflation dipped to 1.7% last month, below the 2% target, the euro and bond yields saw modest rises post-decision, even as the future trajectory remains uncertain, hinging on ongoing data assessments.

(With inputs from agencies.)