Inflation fell in Europe
There is good news for the world burning in the fire of inflation. Inflation levels have come down in about 20 countries in Europe that use the euro as their currency. All of these countries are members of the European Union (EU) and use a common currency. They also have a common central bank, the ‘European Central Bank’ (ECB). Data related to inflation have recently been published by the EU’s statistical agency, ‘Eurostat’.
According to Eurostat, the inflation rate in the euro area fell rapidly in August. It has dropped to just 2.2 percent. This is considered a good sign, because it has paved the way for the ECB to cut interest rates. Will this also affect India?
Loans will be cheaper for people
In addition to the ECB, the US Federal Reserve has long been planning to cut interest rates. By doing so, borrowing will become cheaper not only for businesses but also for ordinary people and will help boost the economy. US Federal Reserve chief Jerome Powell has already indicated that the US central bank could cut interest rates in September.
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Anyway, since Covid, the entire world is in the grip of inflation due to various challenges emerging one after another at the international level. This situation is more frightening in India because food inflation is still higher than the normal retail inflation. For this reason, the Reserve Bank of India (RBI) has not made any change in the repo rate for about one and a half years.
The inflation rate in Germany remained at only 2%
According to Eurostat data released on Friday, the euro inflation rate in July was 2.6 percent. Energy prices fell by three percent in August, resulting in an overall decline in inflation. Inflation in Germany, the largest economy in the eurozone, has dropped to two percent. The ECB has set a target of keeping inflation at 2 percent per month. This is the level considered best for the economy.
The European Central Bank is tasked with maintaining stable prices under the treaty that established the European Union. Not all of the 27 countries in the European Union use the euro. The currency is in circulation in only 20 countries. The ECB may reduce the policy interest rate from 3.75 percent to 0.25 percent at its monetary policy meeting on Sept. 12 next month, while the Federal Reserve may also cut the interest rate at its policy meeting on Sept. 17-18.
Its effect will be visible in India.
The impact of globalisation on the Indian economy is clearly visible. In such a situation, if there is a change in the interest rates of the Federal Reserve and the ECB in the next month. Therefore, the official interest rates could be reduced at the October meeting of the Reserve Bank of India. However, India’s exports are expected to improve after inflation declines in the Eurozone.
