European Central Bank Set to Cut Interest Rates in September, Sources Say
A growing number of European Central Bank policymakers are leaning towards another interest rate cut in September, with only major data surprises potentially causing a delay. Financial markets are already anticipating the move, but policymakers have been cautious in their approach following criticism for being too explicit before the first rate cut in June.
Recent figures on growth, wages, and prices have been influencing their decision, with many now open to the idea of a rate cut next month. The easing of price pressures, lower than expected economic growth, softening wage growth, and signals from the U.S. Federal Reserve all contribute to the case for a cut.
While formal discussions have not yet begun, informal conversations indicate broad support for the move, even among traditionally conservative policymakers. With ECB President Christine Lagarde's backing crucial to the decision, the move is expected to receive wide consensus.
Communicating the cut may prove more challenging than the decision itself, as some fear it could raise expectations for another cut in October. The primary argument for backing a cut is to align with the ECB's inflation target of 2% by late 2025, without delaying it further into 2026.
Overall, the decision to cut interest rates in September is driven by a combination of economic factors and the need to stimulate growth while keeping inflation on track. This move is aimed at supporting the eurozone economy and ensuring stability in the face of ongoing challenges.