The European Central Bank (ECB) is expected to proceed with the third reduction in interest rates this year and the second in a row, after the one in September, at its meeting today, Thursday, October 17.

It is no coincidence, after all, that none of the members of the Board of Directors of the ECB, with the exception of Slovakia’s Peter Kazimir, has not expressed any objection to the prospect of another interest rate cut.

Markets see their decline in October and December as certain, while they see it continuing at a rapid pace in 2025.

The reasons for the reduction decision

OR reducing inflation to 1.8% in the Eurozone in September, combined with the weakening of its economy, make a further cut in the ECB’s deposit rate by 25 basis points to 3.25% almost inevitable.

The ECB has made it clear that monetary policy decisions will be taken at each meeting on the basis of available data, wanting to have freedom of movement depending on the path of inflation towards the medium-term target of 2% while taking into account the course of the economy.

Although inflation is expected to rise in the last quarter of the year, because fuel prices will be compared to last year’s lows, unlike what happened in the previous months, it is now clear that it is moving towards the target.

The governor of the Bank of Greece, Yannis Stournaras, said in an interview with the Financial Times that the target is likely to be reached from the first quarter of 2025, earlier than the ECB predicted in September. For this reason, Mr. Stournaras was in favor of reducing interest rates by 25 bp. both in October and at the next meeting in December, while he was in favor of continuing to reduce them in 2025, as long as the de-escalation of price increases continues.

For greater confidence in the achievement of the inflation target, which will be taken into account at the next meeting, the president of the central bank, Christine Lagarde, spoke to the European Parliament, predicting for her part a possible reduction in interest rates next Thursday .

OR sluggish course of the economy makes the faster easing of ECB monetary policy all the more imperative. After a 0.3% rise in Eurozone GDP in the first quarter of 2024, it slowed in the second quarter to 0.2%, while the S&P Global Momentum Survey showed that private economic activity slowed slightly in September.

For the first time, in fact, since the beginning of the year, all three major economies of the region – Germany, France and Italy – were operating in conditions of contraction of the private economy.

So, the combination of these data makes today’s decision very likely.