Many analysts and market participants are convinced that the European Central Bank will cut interest rates at its upcoming meeting, believing that this will solve a range of economic problems related to unemployment and inflation.

According to Bloomberg, inflation rates in France and Spain have fallen below 2%, fueling expectations among investors and analysts for a swift rate cut by the ECB.

Reports released on September 27 showed that consumer prices in France stood at 1.5% year-on-year in the first month of autumn, down from 2.2% in August. The decline was largely driven by a decrease in energy costs. A similar trend was observed in Spain, where inflation eased to 1.7%. Analysts had expected consumer prices in both countries to remain at 1.9%.

Moreover, signs of economic weakness in Germany were also evident, with unemployment rising more than expected in September. This suggests that economic challenges have a profound effect on the German labor market.

A slowdown in consumer price growth across the euro area has already prompted the European regulator to cut deposit rates twice in 2024. However, a sharp contraction in the private sector has reinforced expectations of faster monetary easing by the central bank.

Recent data indicates a significant decline in economic confidence within the region, weighed down by weakening performance in the industrial and retail sectors.

Following the release of fresh macroeconomic data, markets have raised the odds of another rate cut by 0.25%. The ECB is now widely expected to lower rates at its next meeting scheduled for October 17, with an 80% probability of such a move.

In light of this, Bloomberg economists have revised their outlook for interest rates. "Our base case has now been revised to call for an ECB rate cut in October. We previously expected policymakers to wait on further confirmation of disinflationary trends in the data before cutting borrowing costs in December — that confirmation seems to be arriving early," Jamie Rush, chief economist at Bloomberg, said.

Meanwhile, an August report from the United States revealed a significant slowdown in personal consumption growth. Against this backdrop, the Federal Reserve kicked off an easing cycle, cutting interest rates by 0.50%.