The European Central Bank (ECB), situated in Frankfurt, declared on Thursday that the reduction of its primary deposit rate from 4% to 3.75% was “appropriate”.
It came after its head, Christine Lagarde, declared last month that the rate of price hikes was now “under control”.
However, the Bank said in a statement that the fight was not yet over, indicating that data-driven caution will be used to inform future policy decisions in the coming months.
Even its staff revised upward its inflation projections for this year and the following.
“The governing council will persist in utilizing a data-driven and meeting-by-meeting methodology to ascertain the suitable degree.
The governing council is not tying itself down to a specific rate plan in advance.”
After Russia invaded Ukraine, the major measure of inflation increased to above 10% as the cost of oil and other essential commodities skyrocketed throughout Western economies. The ECB took action to address this rising inflation at that time.
Because of the Bank’s guidance and the president’s previous statements of confidence in the expected trajectory of inflation, the decision to reduce, which came before that of the US Federal Reserve and the Bank of England, was generally expected.
