Inflation is now stabilizing but Europe Central bank is in no hurry to make rate cuts

Christine Lagarde, President of the ECB, at the opening of the ECB Forum on Central Banking in Sintra, Portugal, announced that inflation is stabilizing and that next goal of ECB is to get it down to 2%.

Over the past few years many challenges have emerged with uncertain situation who threatened the EU economy. Fighting against inflation was the primary goal and ECB has managed to low down rates but carefully and in no hurry to make drastic rate cuts.

  • In October 2022, inflation has gone up 10.6%
  • In September 2023, inflation has fallen more than half, 5.2%
  • In June 2024, inflation fall on, 2.6%

After almost a year, we saw inflation got back to 2.6% which led to first rate cuts.

The decision to slowly low down inflation rates is based on many factors, one of them is an urge of many countries outside EU to join BRICS who use Euro currency. One of the country who recent stud against joining the EU was Turkey turning her back and announced to join BRICS.

It’s still uncertain what the EU economy will accomplish in terms of lowing the inflation who had a negative impact for business in EU and outside EU. As the inflation rates slowly fall, there are still many obstacles that may get inflation back on its highest.

The changes that have taken place have had a negative impact on people’s confidence in the ECB’s monetary policy. Due to such inflationary jumps, the majority of loan consumers started to pay attention to inflation, which is why the demand for loans was drastically reduced. The way it helped to tame inflation in the EU slowed down economic growth as interest rates rose steadily and remained high.

The jumps in the prices of oil and gas are closely related to the jump in the prices of other goods, while the salary of citizens remained unchanged. The risks posed by the gradual process of wage negotiations in the Eurozone is one of the inflationary shocks that can be very persistent and have a negative impact on inflation.

The ECB’s decisions have successfully slowed inflation, which is now stable. As the ECB announces, their battle with inflation is not over yet, and the goal is to reduce it to 2% in the second half of next year.