For the first time since 2019, the European Central Bank (ECB) cut interest rates, bringing it down from 4% to 3.75%. Former ECB President Jean-Claude Trichet joins Catalysts to react to discuss how inflation in Europe compares to the United States and what the ECB's latest move could signal for the Federal Reserve.

"The euro area is made of 20 different economies. It's not as simple as in the US, of course," Trichet says. He explains that these economies decide on wages and salary increases on a multiyear basis, which "creates some kind of hysteresis both, I would say, with interest rates being high and inflation being high when you are still running with the previous negotiations with wages and salaries. And then, of course, it amputates the standard of living and the purchasing power."

As all eyes are on the Federal Reserve's next interest rate decision, Trichet says that the data coming from both Europe and the US are pretty similar as the two try to tackle inflation. He adds, "It seems to me that we are two ships that are going in the same harbor... But of course, the weather is not the same in Europe and in the US. So, the decisions are not exactly the same, but the goal is the same."

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This post was written by Melanie Riehl