Good morning and welcome to Friday — it’s June 7 and you’re reading the ABC’s business and markets blog.
Let’s start with the major news overnight, with the European Central Bank cutting interest rates for the first time in five years.
Those who closely follow the central banks know that it was hardly a surprise that the ECB ended up lowering interest rates by 0.25 percentage points to 3.75%, with the bank saying the inflation outlook has “improved markedly”.
But even though inflation — and inflation expectations — have eased, the ECB warned that price pressures remain, and as a result the central bank is not committing to future rate cuts.
“The Governing Council will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction,” the ECB said in a post-meeting statement.
“The Governing Council is not pre-committing to a particular rate path.”
At a post-meeting press conference, ECB President Christine Lagarde warned that while the central bank was confident inflation was easing, it’s acutely aware there are risks at play.
“If the world economy grows more strongly than expected, inflation could turn out higher than anticipated … upside risks to inflation also extend from the heightened geopolitical tensions,” she said.
All in all, that’s led analysts and investors to dub the ECB’s move as a “hawkish cut” — one that’s a slightly aggressive in nature.
There’s plenty more to digest from the decision overnight, so grab a coffee and do as Jeff Probst says:
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