The European Central Bank (ECB) should go on cutting interest rates gradually, according to ECB Governing Council member Martins Kazaks during an interview with Latvia's public broadcaster Tuesday, reported Bloomberg.
"The base scenario at the current moment – and to my mind the one that is the most appropriate – is to continue to lower rates step by step," Kazaks was quoted as saying.
These comments came as the ECB announced that key interest rates would be lowered by 25 basis points in October. Interest rate on the benchmark deposit facilities were decreased to 3.25 percent, the rate on main refinancing operations were cut to 3.4 percent and marginal lending facilities rate were down to 3.65 percent.
Flags at the European Central Bank Building, Hesse, Frankfurt, Germany, July 18, 2024. /CFP
The eurozone's inflation rate hit 2 percent in October driven by food and service prices, according to estimates from Eurostat. This was higher than September's 1.7 percent, which was the lowest level since April 2021.
In October, the ECB said it expected inflation to rise in the coming months before declining to the central bank's 2 percent target in 2025.
Customers queuing at a Mercadona supermarket in Barcelona, Spain, September 14, 2023. /CFP
As last week's US election results continue to be felt and analyzed across the globe, European officials are questioning whether the return of Donald Trump to the White House will mean a more protectionist US.
Republican Donald J. Trump addresses supporters in the run-up to elections at Mar-a-Lago in West Palm Beach, Florida, United States, November 6, 2024. /CFP
According to Kazaks, it is still unclear what will actually happen, and that Europe must avoid escalating any trade war.
He further added that tariffs will not be good for Europe, because of the economy's orientation towards exports and foreign trade, highlighting that such measures could lead to an increase in inflation as well as a weaker economy.
(Cover via Bank of Latvia)