The monthly figure is now close to the ECB’s target of 2%, the level considered best for the economy
Inflation in the 20 European Union countries that use the euro fell sharply to 2.2 per cent in August, opening the door for the European Central Bank to cut interest rates as the ECB and the U.S. Federal Reserve prepare to lower borrowing costs to support growth and jobs.
The monthly figure is now close to the ECB’s target of 2 per cent, the level considered best for the economy. The central bank is charged with maintaining stable prices under the treaty that set up the European Union. Not all of the EU’s 27 countries use the euro. The lower German inflation figure “tilts the balance toward a September rate cut,” said Carsten Brzeski, global chief of macro at ING bank. “Fading inflationary pressure combined with fading growth momentum offer an almost perfect macro backdrop for another rate cut.”
Central banks sharply raised interest rates to counter an outburst of inflation caused by a spike in energy prices following Russia’s invasion of Ukraine, and by clogged supply chains for parts and raw materials as the global economy bounced back from the COVID-19 pandemic.
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