European Central Bank (ECB) policymakers have begun debating whether or not it's time to start lowering interest rates to levels that could help stimulate the economy, according to Reuters.
Earlier this month, the ECB cut borrowing costs by a quarter of a point for the second time in a row as policymakers sought to tackle two simultaneous slowdowns in inflation and growth in the European zone.
This is the first consecutive interest rate cut in 13 years, and is a sign that the ECB has begun to move away from a period of interest rate hikes aimed at controlling high inflation.
Instead, the ECB has indicated that it is now refocusing policy to try to revive the battered European zone economy, which has struggled to match the performance of the US economy over the past two years.
However, policymakers have so far said that they only aim to lower rates to a neutral level that, in theory, does not help or hinder economic activity and maintain inflation stability.
However, based on discussions with several anonymous sources, Reuters reports that the ECB has begun discussing whether interest rates should be lowered below the neutral level or not. One of the sources familiar with the discussions said, "I don't think the neutral rate is enough," Reuters reported.
The sources stressed that any agreement is still a long way off.
Business activity and sentiment surveys from the currency bloc missed estimates in September. Meanwhile, the latest inflation reading released ahead of the ECB announcement showed that growth in core consumer prices eased to 1.7% on an annualized basis last month. The figure, which was initially estimated at 1.8%, was below the 2% target stated by the central bank.
"The latest information on inflation shows that the disinflation process is going smoothly. Inflation prospects were also affected by the shock of the recent decline in indicators of economic activity," according to the ECB statement.
