ECB's Potential Rate Cut Amid Declining Inflation

According to Odaily, European Central Bank (ECB) Governing Council member François Villeroy de Galhau recently discussed the potential for interest rate cuts in light of declining inflation. He noted that the decrease in inflation allows the ECB to consider lowering rates. Additionally, the rate of price increases is currently below the average wage growth, which further supports the case for a rate reduction. Villeroy emphasized that the ECB's interest rate decisions are made independently of the Federal Reserve. He pointed out that the ECB began reducing rates in early June, whereas the Federal Reserve only followed suit three months later. As inflation continues to decline, Villeroy suggested that the ECB would have the opportunity to proceed with further rate cuts. Market expectations are currently leaning towards a 25 basis point rate cut by the ECB at its next meeting in December. However, weaker economic data has increased the likelihood of a more significant 50 basis point reduction. This potential move reflects the ECB's ongoing efforts to manage economic conditions in the Eurozone effectively.