ECB Cuts Rates and Leaves Room for More Easing as Growth Lags

• The European Central Bank (ECB) cut interest rates on Thursday and kept the door open to further policy easing as concerns over lacklustre economic growth supersede worries about persistent inflation.
• It was the fifth ECB rate cut since June and markets expect two or three more this year, driven by arguments that the biggest inflation surge in generations is nearly defeated, and the flagging economy needs relief.
• The ECB reaffirmed disinflation was "well on track" and welcomed slower growth in wages, which should help bring down inflation in the domestically focused part of the economy.
• With the euro zone economy stagnating in the last quarter due to an industrial recession and weak consumption, the ECB is seen sticking to its easing path even after the U.S. Federal Reserve kept rates unchanged and hinted at a lengthy pause.
• Inflation, which rose to 2.4% in December, could still take a few months to ease back to the ECB's 2% goal but there is little to challenge the narrative that all is on track.
• Wage growth is easing, the labour market is softening, oil prices have come off early-year highs and the dollar's relentless firming seems to have stopped for now.

(Source: Reuters)