The European Central Bank has made its third interest rate cut since June, lowering its benchmark rate to 3.25% in an effort to combat falling inflation and a weakening economy. The ECB predicts a temporary increase in inflation before it returns to its target rate of 2% next year. However, analysts believe the slowdown in the eurozone may prompt further rate cuts in the future. Other central banks, such as those in the U.S. and U.K., have also seen a decline in inflation as they raised borrowing costs during the coronavirus pandemic.
The European Central Bank made a surprising move by cutting its key interest rate by a quarter-point, outpacing the U.S. Federal Reserve in the global trend of decreasing borrowing costs. ECB President Christine Lagarde cited easing inflation as the reason for the rate cut, but declined to specify the extent and speed of future cuts. This decision will have widespread impacts on home buyers, savers, and investors, and raises questions about how other central banks will respond to the ongoing inflation concerns.