Inflation Falls To 2.2% In Europe, Clearing Path for ECB Rate Cut

Inflation in the 20 European Union (EU) countries using the euro dropped sharply to 2.2% in August, paving the way for the European Central Bank (ECB) to consider an interest rate cut, according to a report by David McHugh of the Associated Press (AP).

Economists anticipate the ECB will reduce its key interest rate by a quarter point from its current 3.75% at the Sept. 12 meeting.

The drop from 2.6% in July was driven in part by a 3% decline in energy prices, according to Eurostat, the EU’s statistics agency. Inflation in Germany, the eurozone’s largest economy, also fell to 2%.

With inflation nearing the ECB’s target of 2%, which is considered ideal for economic stability, economists anticipate the ECB will reduce its key interest rate by a quarter point from its current 3.75% at the Sept. 12 meeting.

Similarly, the US Federal Reserve is expected to lower rates from a 23-year high of 5.25%-5.5% at its Sept. 17-18 meeting.