The rate-cutting bonanza continues. Eurozone inflation decreased to 1.9% in May, a sign that the European Central Bank continues to be in control of inflationary pressures despite an aggressive interest rate-cutting strategy that has seen rates cut seven times in the past year.
While there remains the question of how international trade uncertainty will affect prices, a strong Euro means that import prices will be kept lower than they may otherwise have been.
With inflation not being recorded at higher than 2.5% since July 2024, the Euro at its strongest against the US Dollar for almost three years, and interest rates likely to be cut to 2% later this week, this has been a successful year of monetary policymaking by ECB President Christine Lagarde and her colleagues, even if the European economy has not yet picked up as hoped. They have set the foundations for economic growth, put the inflation issue to bed, and appear to have returned normalcy to the economy — at least for now.
With the OECD now forecasting the slowest growth in the global economy since the pandemic, the ECB has given the Eurozone a much better chance than others to turn this around.
The ECB has a dual mandate, requiring it to take decisions to foster growth as well as control inflation. The main focus for several months been stimulating the European economy.
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