Together these four countries account for almost three-quarters of the euro area economy. The figures are part of a broader pattern of data showing an economic slowdown in Europe. Germany’s main economic institutions last week revised downward their joint forecasts for this year, expecting the economy to contract for the second year in a row.
A news agency report on Monday suggested that the Berlin federal government would adjust its latest forecasts in October accordingly. Germany said inflation had fallen to 1.8% due to low energy prices, and there were increasing signs of weakness in most service sectors, excluding holidays. “We have everything the ECB needs to continue cutting rates,” Carsten Brzeski, global head of macro at ING, said in a note to clients.
At its September meeting, the ECB cut its main deposit rate for the second time this year, from 3.75% to 3.50%. However, Lagarde suggested at the time that the central bank would likely wait until December to act again due to continued uncertainty over lingering inflation, particularly in the services sector.
Since then, a series of decidedly pessimistic business surveys and a flurry of negative news, particularly from the auto sector, appear to have provided a “strong argument” to those on the board, such as Bank of Portugal president Mario Centeno. . for more urgent response.
At first glance, the biggest factor behind the slowdown in national inflation in September was the sharp drop in energy prices. Oil prices, in particular, have fallen in recent weeks due to concerns about economic slowdown in the world’s three largest oil-consuming countries, the United States, China, and Europe. However, national statistics also show that underlying inflationary pressures in the form of services inflation are easing, albeit more slowly.
