Expectations of the European Central Bank (ECB) lowering the interest rate in September are increasing after the July purchasing managers' index came in weaker than expected. The composite index, i.e. both for the service sector and manufacturing industry, fell to 50.1, contrary to what the market had forecast, which expected a rising figure.
The decline means that it is now very close to the 50-line, which traditionally indicates growth in the economy. The decline is now seen as yet another sign that the European economy is slowing down further, and this in turn speaks in favor of further interest rate cuts. Market economists are currently pricing in two interest rate cuts from the ECB until the end of the year.
