European Central Bank Cuts Rates for Second Time in Three Months

The European Central Bank cut interest rates on Thursday for the second time in three months, as it continued the slow unwinding of the aggressive stance the bank took to stamp out high inflation in the eurozone.Central bank officials, who set rates for the 20 countries that use the euro currency, lowered the deposit rate a quarter percentage point, to 3.5 percent from 3.75 percent.Inflation has slowed and the central bank has faced pressure to help the region’s ailing economy: Growth has been weak for more than a year, in part because of anemic household spending and high interest rates holding back investment.Still, policymakers have taken a cautious approach, lowering rates slowly from their record high because of concerns about stubborn inflation in the services sector, which includes hospitality businesses and insurance.

The move on Thursday comes after the central bank cut rates in June, which was the first decrease since 2019.“It is now appropriate to take another step in moderating the degree of monetary policy restriction,” the bank’s governing council said in a statement.Even as inflation has dropped from its double-digit highs in the eurozone, policymakers there, like those in Britain and the United States, have only tentatively begun the process of easing monetary policy.After leaving rates at high levels for an extended period, central bank officials have become increasingly confident that their policies have stopped high inflation becoming embedded in their economies.

But wary of declaring victory over inflation too early, they are expected to keep rates high enough to keep economies from overheating.Next week, the U.S.Federal Reserve is widely expected to cut rates for the first time in more than four years after inflation slowed to 2.5 percent in August.

The Bank of England cut rates last month for the first time since early 2020.But interest rates are still far away from what economists call the neutral rate, where interest rates neither...