ECB cuts rate by 25 bps as inflation falls to three-year low

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The ECB's rate cut follows a sharp drop in inflation to 1.8%. Further rate cuts expected by markets in December.

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At its monetary policy meeting today, the Euro Central Bank decided to cut interest rates by 25 basis points, from 3.5% to 3.25%. Inflation fell to a three-year low of 1.7% in September, below the initial estimate of 1.8%, the bank's third rate cut this year.

The ECB's decision was widely expected as inflation and core inflation in the eurozone eased. Since inflation fell below the bank's target of 2 percent in September, there has been little pressure to raise interest rates to curb inflation.

In addition, before the meeting, several ECB officials, including President Christine Lagarde and Bank of France Governor Francois Villeroy de Galhau, hinted at the possibility of a reduction. Lagarde expressed confidence that “inflation will return to the target in time.”

The ECB made its first rate cut in June, cutting its benchmark interest rate from 4 percent to 3.75 percent. After that, the second reduction was reduced to 3.5% in September. Financial markets are predicting another 25-basis-point decline in rates to 3% in December after today's decision.

Economic concerns are also among the factors driving the ECB's decision. Eurozone economic growth is slowing and third-quarter GDP forecasts may be cut.

Tight monetary policy and structural issues are contributing to the slowdown. Low interest rates can stimulate economic activity amid growth challenges, cold labor markets and geopolitical risks.

Lower interest rates are expected to stimulate economic growth and have a positive impact on traditional equity markets. This, in turn, could increase investor interest in risky assets such as Bitcoin.

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