Renowned ECB Governing Council member Olli Rehn has indicated that the current slowdown in inflation and economic weakness in the Eurozone could pave the way for a reduction in borrowing costs next month, as reported by Bloomberg.
Key Takeaways from Olli Rehn’s Comments
– The European growth outlook, particularly in manufacturing, remains subdued.
– This supports the case for a rate cut in September.
– Data available suggests a September rate cut is justified.
– Disinflation and a weak economy are driving forces behind a potential cut next month.
– The downtrend in inflation is continuing, although services inflation remains strong.
– Rehn emphasizes the importance of remaining open to options, based on data.
Market Response
As of the latest update, the EUR/USD pair has dipped by 0.02% to 1.1188.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region, aiming to maintain price stability by keeping inflation around 2%. Decisions are made by the ECB Governing Council, including the President Christine Lagarde.
In extreme situations, the ECB can implement Quantitative Easing (QE) to stimulate the economy. QE involves buying assets with newly created money, typically resulting in a weaker Euro. Quantitative Tightening (QT) is the opposite, aiming to reduce liquidity in the market.
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