The intention of the central bankers who sit on its Board of Directors European Central Bank (ECB) to proceed with a further reduction in interest rates next week, as the data on the evolution of inflation is favorable, reflected indirectly but clearly, in the minutes of their last meeting made public today.

THE inflation in the eurozone it fell to 1.8% in September, i.e. below 2%, which is the target set by the ECB.

As recorded in the minutes, central bankers believe that it should be “free to respond to all incoming data”. In addition, they underlined that the speed with which the further reduction of interest rates should proceed depends on the evolution of the incoming data.

First the minutes just published confirm that at the September meeting, the ECB appeared determined to continue the very gradual pace of interest rate cuts (monetary policy easing). Therefore, as some economists argue, at the next meeting in October it would be rather premature for the ECB to have formed a clear assessment of the outcome of inflation, despite the positive development in September.

By this reasoning, the December meeting was clearly the preferred option for the next one reduction of interest ratesas then the ECB will have at its disposal the new revised forecasts for inflation and growth.

But already central bankers such as the governor of the Bank of Greece Giannis Stournaras, argue that the ECB could proceed with two reductions of its interest rates by 0.25% each time until December.

Its French counterpart moved on the same wavelength today Francois Villeroy de Galhauwho said a cut is “very likely” and “won’t be the last.”

Of course, as can be seen from the published data, central bankers appear cautious in practice, as the risk of delays in achieving the ECB’s target (for inflation) justifies some caution in order to avoid a premature relaxation of monetary policy. On this, Yiannis Stournaras argued yesterday to the FT that even after a reduction in the key interest rate by 0.5% to 3%, the monetary policy remains restrictive.

The concerns of the central banks, as reflected in the minutes, about the future of development in the eurozone are also in favor of lowering interest rates.

As noted the economic outlook for the Eurozone was more worrying and the predicted recovery was fragile. Economic activity remained subdued, with risks to economic growth remaining elevated.

After all, these concerns are also reflected in the lower growth forecasts for 2024 and 2025 compared to June. In fact, as pointed out, with inflation ever closer to the target, real economic activity should become more important for the direction that monetary policy should take.