As expected, the European Central Bank (ECB) revised its key rates downwards by 0.25% to set the deposit rate at 3.25 and the refinancing rate at 3.4%. This decision did not particularly rush the markets, which reacted little to the news.
Looking ahead, the ECB will remain attentive to economic indicators to determine the most appropriate pace and magnitude of future policy rate cuts.
Nevertheless, the decline in inflation will help it stay on the path of monetary easing. Eurostat said inflation in the eurozone was 1.7% in September (compared to 2.2% in August). A further decline in the price of credit is widely expected at the next monetary policy meeting, which will end on 12 December.
Energy prices made inflation fall
However, we will have to remain attentive to price developments. The sharp decline in September was made possible by the fall in energy prices (-6.1% year-on-year). Elsewhere, particularly on the cost of services, the increase remains strong (+3.9% over one year), given that core inflation (excluding energy and unprocessed food) remains at 2.7%.
This cheaper credit will give some breathing space to European consumers and businesses. However, it does not represent a panacea against the Old Continent's difficulties. It is difficult to see how companies and households will start spending lavishly at a time when uncertainty about the future remains very high and entire sectors of the economy are facing significant challenges and zero visibility.
The ECB and its monetary policy are often blamed for all the ills affecting the eurozone. However, the fact is that if she is struggling, it is not so much Christine Lagarde and her colleagues' fault. The latter are only more or less following the significant trends in global monetary policy, particularly that of the Fed.
Structural policies are needed
Europeans lack confidence and prefer saving a significant portion of their income. The reason is Europe's inability to implement long-term policies that generate innovation or employment or even show pragmatism in managing delicate issues.
Therefore, even if the ECB's rate cuts allowed our economies to stay afloat, we should not expect miracles, and growth would remain sluggish. We invest in the eurozone through certain individual stocks.