European Central Bank rate cut by 25 bps Monetary policy decisions
Today, the Governing Council resolved to decrease the interest rates of the three primary ECB interest rates by 25 basis points. In particular, the Governing Council’s decision to decrease the deposit facility rate, which is the rate by which it directs the monetary policy posture, is predicated on its most recent evaluation of the inflation outlook, the dynamics of underlying inflation, and the effectiveness of monetary policy transmission.
The disinflationary process is proceeding smoothly, as indicated by the recent inflation data. The inflation prognosis is also influenced by recent negative surprises in economic activity indicators. In the interim, financing conditions continue to be restrictive.
It is anticipated that inflation will increase in the months ahead, followed by a return to the target level over the course of the following year. As salaries continue to increase at an accelerated rate, domestic inflation remains elevated. Simultaneously, profits will partially mitigate the inflationary effects of labour cost pressures, which are expected to continue to subside progressively.
The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner. It will maintain policy rates that are adequately restrictive for the duration required to accomplish this objective. The Governing Council will persist in its use of a data-driven and meeting-by-meeting approach to ascertain the appropriate level and duration of restriction.
In particular, its interest rate decisions will be determined by its evaluation of the inflation outlook in relation to the incoming economic and financial data, the dynamics of underlying inflation, and the effectiveness of monetary policy transmission. The Governing Council is not pre-committing to a particular rate path.
Key interest rates of the European Central Bank
Today, the Governing Council resolved to decrease the interest rates of the three primary ECB interest rates by 25 basis points. Consequently, the interest rates on the deposit facility, the main refinancing operations, and the marginal lending facility will be reduced to 3.25%, 3.40%, and 3.65%, respectively, effective October 23, 2024.
