FRANKFURT (Reuters) – The European Central Bank’s (ECB) cut in interest rates last month was a way to hedge against risks of decelerating inflation, although monetary policy makers appear divided on the risk of too low price growth, shows the report of the last meeting of the Frankfurt institution, published Thursday.

The ECB last month cut its deposit rate by 25 basis points to 3.25%, the third cut in borrowing costs in the current round of monetary easing that began in June.

She made clear that a further reduction was coming given weak economic growth and easing price pressures, although the question of timing remains open.

“Acting now could provide insurance against downside risks that could lead to failure to meet the target in the future and would promote a soft landing,” the minutes summarized, while acknowledging that the new data available was limited.

“If the slowdown signaled by economic activity indicators and the surprise drop in inflation prove to be temporary, a decision to cut rates now could, in hindsight, turn out to be a simple anticipation of the December cut “, added the institution.

The ECB report, however, appears to reveal disagreement over the degree to which price pressures are weak.

Monetary policymakers agreed that inflation would reach the 2% target earlier than the previous projection for the end of 2025, but opinions differ on what happens next.

One group seems to argue that inflation remaining permanently below the target is not an option.

“Such a scenario would likely require a combination of several factors,” the report said, citing among others an economy in recession, a weakening financial system, fading wage pressures and a downward shift in job expectations. ‘inflation.

Another group believes the problem is deeper and that inflation could remain below its target, an outcome the central bank considers as undesirable as overshooting the target.

(Written by Balazs Koranyi, Diana Mandiá, edited by Blandine Hénault)

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