ECB Cuts Interest Rates as Growth Dwindles

• The European Central Bank cut interest rates again on Thursday as inflation slows and economic growth in the eurozone falters but gave few clues to its next step, even as investors bet on steady policy easing in the months ahead.
• The ECB lowered its deposit rate by 25 basis points to 3.50%, following up on a similar cut in June as inflation is now within striking distance of its 2% target, and the domestic economy is skirting a recession.
• The move had been widely telegraphed, and investor attention has already shifted to what comes next and how ECB decisions will be shaped by the U.S. Federal Reserve's expected start to its own rate cuts next week; however, the ECB gave little away.
• "Our path, of which the direction is pretty obvious - a declining path - is not predetermined, neither in terms of sequence nor in terms of volume," ECB President Christine Lagarde told a press conference. She instead repeated the bank's standard formula for a "data-dependent", meeting-by-meeting approach to policy with no pre-commitments.
• With just five weeks until the next policy meeting, they said there may be little new data to support an October cut. Lagarde painted a mixed picture of inflation in the eurozone continuing to be sustained by rising wages even as overall labour cost pressures moderated and were absorbed by companies.
• She said services sector inflation remained a major worry but that wage growth is moderating, and corporate profits are absorbing rapid wage increases. Lagarde warned that negotiated wage growth will remain high and volatile this year in light of some high profile pay deals struck recently.

(Source: Reuters)