It seems like the European Central Bank (ECB) has fully embraced its role as the conductor of the European economy, trying to get the financial orchestra in tune. On Friday, ECB officials delighted the world with the news that inflation might decrease faster than anticipated. Meanwhile, economic growth continues to crawl along at a snail’s pace. However, this is only sparking debates about lowering rates and doing it faster than before.
The ECB has already cut interest rates three times this year, and it looks like they are not done yet. Investors, ever the optimists, are now expecting rate cuts at each of the upcoming meetings. There will be four or five meetings in the near future. After all, what else can the regulator do when inflation is about to hit that magic 2% and the regional economy is swaying on the edge of a recession?
Insiders are now saying that inflation could hit 2% sooner than anyone anticipated. Estonian banker and blogger Madis Müller seems to sense the winds of change. On Friday, he boldly announced that the latest forecasts could be forgotten as the economic growth did not look like a dynamic marathon.
A fresh survey of professional forecasters is backing up this view. They insist that inflation will return to 2% much quicker than the ECB predicts. According to their calculations, the price growth next year will be just 1.9%, which is lower than previously predicted.
The drop in inflation to 1.7%, the lowest in three years, encouraged economists so much that they immediately began revising their outlook. Weak energy prices and sluggish economic growth are confidently pointing to further easing of price pressures. HSBC, for example, predicts some fluctuations. Thus, inflation might hit 1.9% again in October, briefly exceed 2% in December, and then bounce around between 1.6–1.8% in the first half of 2025.
The current state of affairs excites politicians and investors so much since the economic growth is still slowing down. A survey of major companies confirmed this fact. Thus, business activity is barely moving forward, and while the services sector is holding things together, manufacturing companies are not rushing to expand. What is more, the uncertainty around the "green" economy and high costs seem to be stressing businesses. As a result, companies are cutting investments, revising budgets, and dreaming of an economic miracle.