ECB Lowers Interest Rate, Signals Disinflation Progress

The European Central Bank (ECB) is maintaining a cautious but optimistic outlook on disinflation, with ECB member Peter Kazimir expressing confidence that the disinflation path is on solid ground. Recent economic data shows inflation in the eurozone has dropped to 1.7%, below the ECB's 2% target for the first time since July 2021, prompting the ECB to cut interest rates by 75 basis points over three meetings this year. Kazimir indicated that while the central bank is prepared to continue easing if disinflation accelerates, it remains vigilant regarding persistent wage growth and services inflation that could pose risks. The EUR/USD exchange rate is currently testing key support levels as markets react to the ECB's policies and economic indicators. Traders are monitoring the potential for further rate cuts, with expectations that the deposit rate could fall to 2% by next year if disinflation trends persist. However, Kazimir cautioned that the ECB must remain adaptable to new data that could indicate higher inflation risks.