The European Central Bank (ECB) cut interest rates for the first time since 2019, moving from 4% to 3.75%. Former ECB president Jean-Claude Trichet joins Catalysts to react to the decision and break down the road ahead to curb inflation.
"The decision which was taken was very much anticipated," Trichet says. He notes that while headline and core inflation have risen, unemployment decreased to 6.4% in April, the lowest on record since the initiation of the euro. He adds that while the future may be bumpy, economic recovery is gaining some momentum.
The ECB said that its future decisions would be data-dependent, which Trichet believes is a "very reasonable" move. He explains, "I think they are right to mention the fact that they do not want to be pre-committed to a particular path for the decrease of the interest rates, and frankly speaking, it seems to me very wise because now they have succeeded extremely well from a peak at 10% to go down a lot. And the anchoring of expectations is quite good, so they have to continue to be cautious."
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