This week, the EU became the second-largest global economy to lower its lending rate, citing advancements in combating inflation.
The primary interest rate of the European Central Bank (ECB) has been lowered from an all-time high of 4% to 3.75%.
This comes after Canada decided to lower its official lending rate on Wednesday.
The ECB’s decision coincides with the four days leading up to EU-wide elections, the results of which are predicted to reflect voters’ discontent with rising living expenses.
The ECB’s president, Christine Lagarde, stated that the inflation outlook had “markedly improved,” opening the door for the rate reduction.
She did, however, issue a warning, stating that inflation would probably stay above the bank’s 2% objective “well into next year.”
According to her, the European Central Bank will maintain interest rate policy “sufficiently restrictive for as long as necessary” in order to lower inflation to the Bank’s target of 2%.
She did, meanwhile, clarify that “we are not pre-committing to a particular rate path.”
Although the rate decrease was widely expected, Lindsay James, financial strategist at Quilter Investors, said it would still be a relief for businesses and consumers throughout the continent.
