Frankfurt’s decision to cut rates comes on the eve of what is expected to be another expansionary budget in advance of general election
Frankfurt’s decision to cut rates comes ahead of what is expected to be another expansionary budget in advance of general election
Ministers want to try to frame the election around the economy and having a positive move on mortgage rates as well as a generous budget offering fresh in the minds of voters will help.Backbenchers are also said to be keen to avoid an election in January and February — the Government officially has until March next year to hold the vote — when post-Christmas bills arrive and winter energy costs bite. Consumer sentiment also tends to be lower at the start of the year.
There is a perceptible shift in emphasis, however, from inflation to the stuttering performance of the euro zone economy with growth in the second quarter recently revised down on the back of a worrying contraction in Germany, Europe’s powerhouse economy.The ECB said financing conditions in the euro area remain restrictive with economic activity “still subdued, reflecting weak private consumption and investment”. It projects the euro area economy will grow by a meagre 0.8 per cent this year.
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