The post ECB faces renewed challenges with low inflation in the Eurozone appeared on BitcoinEthereumNews.com.

The European Central Bank (ECB) is once again battling inflation problems. But this time, inflation isn’t too high — it’s too low. In September 2023, inflation dropped to 1.8%, falling below the ECB’s 2% target. This decline marks a sharp turn from the previous surge in prices, which pushed the central bank to raise interest rates to a record 4%. The threat has the ECB rethinking its strategy, with investors expecting a rate cut during the upcoming October meeting. Rate cuts and ECB’s concerns of undershooting inflation Financial markets are betting on a quarter-point cut, bringing rates down to 3.25%. This could be the beginning of a series of reductions in borrowing costs. Economists believe that without aggressive action, inflation could continue undershooting the ECB’s target. Analysts predict that interest rates might fall as low as 1.7% by mid-2024. Jens Eisenschmidt, Morgan Stanley’s chief Europe economist, sees this as one of the biggest challenges for the ECB. He points out that the central bank has struggled with low inflation in the past. From 2011 to mid-2021, inflation failed to meet the ECB’s target in 93 out of 120 months. The 2% inflation goal was set in 2021, replacing a more conservative target of “below, but close to 2%.” The bank’s official forecast is that inflation will reach its 2% target by the fourth quarter of 2025. However, doubts are already forming around these projections. ECB staff, according to September’s meeting minutes, were already worried about falling short of the target even before September’s inflation figures were released. There is now a growing sense that the risks of undershooting the target are “non-negligible.” Yannis Stournaras, governor of the Bank of Greece, also weighed in, predicting that inflation might not hit the target until the first quarter of 2025. This comes as…

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Filed under: News - @ October 13, 2024 11:17 am