Eurozone inflation has dropped from above 10% at its 2022 peak to a near three-year low of 2.4% in April. Forecasts see a rise to 2.5% when May’s data comes out later this week.
There are indications that the European Central Bank (ECB) may be planning to cut interest rates at its meeting next month.
In an interview with the Financial Times, the ECB’s chief economist Philip Lane said: “Barring major surprises, at this point in time there is enough in what we see to remove the top level of restriction.”
If there is a cut at the 6 June meeting, which takes place as the European elections are being held, it would mean the ECB would be cutting its rates ahead of any other major central banks. It had came under criticism for being too slow to raise them after inflation surged three years ago.
Eurozone inflation has now fallen close to the ECB’s target figure of 2% and investors believe that leaves room for the central bank to cut its benchmark deposit rate by 0.25%. The rate is currently 4%.
While some central banks have already cut the cost of borrowing, the US Federal Reserve and the Bank of England have yet to make a move.
