European Central Bank Cuts Interest Rates

LONDON (Reuters) – The European Central Bank (ECB) cut interest rates for the third time this year on Thursday, noting that inflation in the eurozone is increasingly under control while the economic outlook has worsened.

The euro initially rose following the rate decision but later fell back after stronger-than-expected U.S. data. It last traded 0.25% lower at $1.0836, down from $1.0863 before the ECB announcement (EUR=EBS).

Europe's broad STOXX 600 index was last up 0.8%, while Germany's 10-year government bond yield, the benchmark for the bloc, rose by 3 basis points to 2.21%, up from 2.197%. Yields move inversely to prices.

Comments:

Robert Farago, Head of Strategic Asset Allocation at Hargreaves Lansdown, UK:

"Growth is so slow in Europe and inflation is back at target; it would be a surprise if they (the ECB) didn't continue to cut."

"What matters more for European stocks is what's happening in the U.S., as their rate decisions are more complicated due to a strong economy and sticky core inflation."

"The U.S. is where we look for a surprise. The case for European rate cuts is clear-cut."

"During ECB Chief Christine Lagarde's speech, we'll focus on wage inflation, core inflation, and service inflation."

Dean Turner, Chief Eurozone Economist, UBS Global Wealth Management, London:

"We believe this is unlikely to be the last cut from the ECB this year. Another cut is likely in December, followed by a series of cuts every meeting through June next year, with the deposit rate hitting 2% before the ECB pauses."

"In the equity market, small and mid-caps in the eurozone present attractive value and should benefit from ECB rate cuts."

"We expect the lower rates environment, along with ongoing U.S. economic resilience, to boost cyclical currencies like the euro, which we predict will perform well against the U.S. dollar in the coming months."

Roberto Mialich, Forex Strategist, UniCredit, Milan:

"The message aligns with our expectations. The ECB cut rates and made it clear they depend on data."

Seema Shah, Chief Global Strategist, Principal Asset Management, London:

"It's increasingly clear that gradual ECB monetary easing is insufficient and back-to-back rate cuts are necessary."

"The ECB has resisted providing forward guidance, but it’s unlikely there will be a drastic data turnaround that would allow them to stand pat in December."

Carsten Brzeski, Global Head of Macro, ING, Frankfurt:

"Only five weeks after the last cut and with limited economic data since then, the ECB appears significantly concerned about the eurozone's growth outlook and the inflation undershooting risk."

Matthew Landon, Global Market Strategist, JPMorgan Private Bank, London:

"The ECB's shift from quarterly rate cuts to back-to-back reductions signals a change in focus from inflation to growth concerns."

"We expect possible cuts through 2025 toward a terminal rate around 2%."

Mark Wall, Chief European Economist, Deutsche Bank, London:

"The cut is substantial as the ECB accelerates its easing cycle with successive cuts but avoids committing to a specific policy path, sensible given the uncertainties ahead."

Arne Petimezas, Director of Research, AFS Group, Amsterdam:

"ECB cuts rates by 25 bps as expected. Their inflation and economic assessment states the obvious with no surprises."

Marchel Alexandrovich, Economist, Saltmarsh Economics, London:

"The ECB lowers interest rates at consecutive meetings for the first time since 2011 and seems likely to cut again in December."

"Even after today’s move, policy remains in restrictive territory, and with easing inflationary pressures, the Governing Council is comfortable nudging rates lower toward a neutral level.