Gediminas Simkus, European Central Bank Governing Council member and Lithuanian central bank governor, said the ECB is likely to cut its key interest rate to a "natural" level between 2%-3%, but it may have to ease monetary policy even further if the inflation processes get entrenched.
According to official data, consumer price growth in the eurozone slowed in September, falling below experts' forecasts and preliminary estimates. Meanwhile, core inflation fell to a 5-month low. According to the report, the consumer price index rose by 1.7% per year after an increase of 2.2% per year in August. The September reading was the lowest since April 2021. Economists had expected inflation to fall to 1.8%. The last time inflation fell below the ECB's target level (2%) was in June 2021. The core consumer price index - excluding energy, food, alcohol and tobacco - rose by 2.7% per year, slowing compared to August (+2.8%), and confirming experts' forecasts.
Last week, the ECB lowered its deposit facility rate by 25 basis points to 3.25 per cent, as widely expected. That marked the third straight rate reduction by the ECB this year. In addition, the ECB’s interest rates on its main refinancing operations and marginal lending facility were cut by 25 basis points each to 3.40 per cent and to 3.65 per cent, respectively. Those decreases also matched markets’ forecasts. In its policy statement, the ECB noted that "the decision to lower the deposit facility rate is based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission".