We’ll keep cutting rates, says ECB boss Lagarde amid signs eurozone economy is shrinking

Christine Lagarde vowed to keep cutting interest rates in the eurozone amid signs the economy continues to shrink.

Declaring that the ‘darkest days’ of high inflation ‘look to be behind us’, the European Central Bank chief said: ‘The direction of travel is clear and we expected to lower interest rates further.’

The ECB last week cut rates for a fourth time this year to 3 per cent in a bid to kick-start the stuttering eurozone economy.

Data firm S&P Global yesterday said its closely-watched purchasing managers index of activity in the region hit 49.5 this month – below the 50 mark that separates growth from decline. 

That was higher than last month’s score of 48.3 – and better than expected by economists – but still signals that the eurozone economy is shrinking.

The figures also showed companies cutting jobs at the fastest pace in four years as they respond to a drop in workloads.

The downturn mainly reflects the woes of Germany and France, the eurozone’s two biggest economies, which shrank as the rest of the bloc grew.

At the heart of Germany’s woes is the collapse of its once-mighty industrial sector amid the loss of cheap Russian energy and the decline in demand from China.