On Thursday, shares in Germany closed with a downcast sentiment, as the blue-chip DAX index fell by 0.23%. This decline coincided with the release of the September monetary policy meeting minutes from the US Federal Reserve, detailing significant developments in economic strategy. The minutes revealed that the Federal Open Market Committee (FOMC) opted to lower the target range for the federal funds rate to between 4.75% and 5%, a decision driven by robust expansion within the United States economy. The essence of the discussions held during the FOMC meeting underscored that future monetary policy decisions will pivot on meticulous assessments of incoming data, adaptive economic outlooks, and risk evaluations.
The committee's readiness to modify monetary policy underscores their commitment to achieving a 2% inflation target while maintaining maximum employment levels. In concurrence with new economic data releases, the US Bureau of Labor Statistics unveiled inflation figures for September, indicating a slight deceleration in the annual inflation rate, now at 2.4%, compared to 2.5% in the previous month.
Additionally, the core inflation rate saw an increase, rising to 3.3% from 3.2%. These metrics illustrate the delicate balance the Fed must maintain as it navigates economic stability and growth. Switching focus back to Germany, the Federal Statistical Office reported an increase in retail sales by 1.6% month over month for August, with results reflecting both real and nominal growth.
This follows a preceding month that saw retail sales rise by 1.5% in real terms and 1.7% in nominal terms, showcasing a resilient consumer market despite broader economic uncertainties. In a more cautious tone, ING adjusted its growth forecast for the eurozone economy for 2025 down to 0.6%, aligning it with projections made for 2024.
The Dutch financial institution pointed to a potential winter economic slowdown, supported by recent unimpressive economic indicators. Reflecting its more pessimistic outlook on economic growth, ING anticipates further easing from the European Central Bank (ECB). Previously, forecasts suggested cuts to interest rates would occur once per quarter in the latter half of 2025.
However, with inflation appearing to stabilize and economic indicators showing signs of weakness, ING now posits that the ECB could cut rates during the upcoming October meeting, a move which might extend to subsequent meetings until the deposit rate reaches 2%. On the corporate side, Deutsche Telekom ($DTE) has announced plans to propose a higher dividend distribution for 2024, alongside a substantial share buyback program valued at up to 2 billion euros for 2025.
The German telecommunications titan indicated that these proposed returns to shareholders reflect their strong operational performance throughout 2024 and an optimistic outlook for the remainder of the year. Upon market close, Deutsche Telekom's stock rose by 1.68%, indicating investor approval of the company’s commitment to enhancing shareholder value..