Good breakdown of ECB's recent interest rate cut 11/10/2013 - 00:00 Consumer price inflation in the Eurozone has been below the target of 2% and falling for quite some time. But until now, the ECB has been sitting on its hands. Inflation some distance below target didn’t appear to bother it – most likely because the (unbelievable) forecasts for Eurozone recovery created inflation expectations in the 1.5 – 2% range, so it saw no need to act on what was assumed to be a temporary problem.So why did the ECB, in a complete reversal of its previous stance, suddenly cut the refi rate to 0.25%? Well, Eurozone consumer price inflation has touched a record low of 0.7%, driven by falling energy prices and stagnant prices in other sectors. But inflation expectations are still where they were before, based on expectation of a strong Eurozone recovery.
