06 June 2024

Meanwhile in Frankfurt

The European Central Bank has cut its benchmark rate for the first time in 5 years.

This is a bit of a surprise because:

  • Inflation is higher in Europe than it is in the US.
  • The ECB has no mandate for employment, just inflation control. 

The cynic in me is thinking that they are trying to make people less likely for right wing parties in the upcoming European Parliament elections: (A central bank meddling in elections? Say it ain't so.)

The European Central Bank has cut interest rates for the first time in almost five years, but warned future reductions would depend on price pressures easing further.

Thursday’s quarter-point cut to 3.75 per cent, which has not yet been replicated by central banks in the US and UK, represented a milestone in the fight against inflation after the biggest surge in prices for a generation.

ECB president Christine Lagarde said there was a “strong likelihood” the decision marked the beginning of “dialling back” rates from their all-time high. But she added further moves would “depend on the data that we receive”.
Spoiler, a 25 basis point cut in interest rates is not gonna change the outcome of the election.


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