The euro zone economy grew by 0% in the fourth quarter of 2024, missing expectations of a 0.1% increase. This stagnation follows weaker-than-expected growth from Germany and France. The European Central Bank is expected to cut interest rates further as concerns about slowing growth outweigh inflation worries.
The euro zone economy experienced no growth in the fourth quarter, according to flash figures released by Eurostat, the European Union's statistics agency, on Thursday. Economists surveyed by Reuters had anticipated a modest growth of 0.1% for the period, following a larger-than-expected 0.4% expansion in the third quarter. This stagnant growth follows disappointing reports from the euro zone's two largest economies, Germany and France.
Earlier on Thursday, official data revealed that the euro weakened against the dollar following the release, a development that could influence the European Central Bank's decision regarding its next interest rate adjustment later in the day. The central bank has been actively trying to stimulate economic activity and investment within the euro zone. Economists anticipate the central bank to implement further interest rate reductions this year as concerns over slowing growth overshadow worries about persistent inflation within the bloc. 'The stagnation observed in euro-zone GDP during the fourth quarter reinforces our view that the region's economic outlook is more pessimistic than widely perceived. We anticipate this development to prompt the ECB to implement more substantial interest rate cuts this year than currently factored into market expectations,' stated Jack Allen-Reynolds, deputy chief euro zone economist at Capital Economics, in an email response to the data release.The European Central Bank acknowledged in December that survey-based indicators related to economic activity, such as the Purchasing Managers' Index (PMI) and business and consumer confidence indicators from the European Commission, remained subdued. The ECB had initially projected the economy to grow by 0.2% in the fourth quarter of 2024, considering the dissipation of one-off factors that buoyed growth last summer, including the Paris Olympics, coupled with continuing 'subdued confidence, high uncertainty and geopolitical tensions.' The central bank predicts GDP growth to pick up to 0.3% in the first quarter of 2025. The European flag flutters next to the headquarters of the European Central Bank (ECB) in Frankfurt am Main, western Germany, on April 11, 2024, ahead of an ECB press conference on Eurozone monetary policy. Central bank policymakers remain attentive to inflationary pressures within the region, as the euro zone consumer price index has shown upward movement in recent months. Core inflation, which excludes volatile food and energy prices, remained steady at 2.7% for the fourth consecutive month. The central bank projects the inflation rate in the bloc to reach 2.1% this year
EUROZONE ECONOMY GROWTH EUROPEAN CENTRAL BANK INTEREST RATES INFLATION
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