The Governing Council decided today to cut the European Central Bank’s three key interest rates by 25 basis points. In particular, the decision to reduce the deposit facility rate – the rate at which the Governing Council directs its monetary policy stance – is based on its updated assessment of inflation expectations, core inflation dynamics, and the strength of the transmission rate. Monetary policy.
The process of reducing inflation is on track and staff expect headline inflation to average 2.4% in 2024, 2.1% in 2025, 1.9% in 2026, and 2.1% in 2027 when the trading system begins. Emissions enlarged EU action.
For inflation excluding energy and food, staff expect an average of 2.9% in 2024, 2.3% in 2025, and 1.9% in 2026 and 2027.
The statement explained that most core inflation measures indicate that inflation will stabilize at the 2% level set by the Board of Governors in the medium term on a sustainable basis. Domestic inflation has decreased slightly but remains high, and this is mostly due to the fact that wages and prices in certain sectors are lower. They still adapt to high inflation in the past with significant delay.
The European Central Bank confirmed that financing conditions have become more accessible, as the recent cuts in interest rates approved by the European Central Bank’s Board of Governors are working to make new borrowing less expensive for companies and families. But these conditions remain tight because monetary policy remains constrained, and previous interest rate increases continue to trickle down to the existing stock of credit.
Employees now expect a slower economic recovery than in September forecasts and although growth rebounded in the third quarter of this year, survey indicators suggest it has slowed in the current quarter.
Staff see the economy growing by 0.7% in 2024, 1.1% in 2025, 1.4% in 2026, and 1.3% in 2027. The expected recovery depends mainly on rising real incomes – which would They allow households to consume more – and increase corporate investment. Over time, the gradually fading effects of restrictive monetary policy should support a recovery in domestic demand.
The ECB noted that the Governing Council is determined to ensure inflation is sustainably stable at its medium-term target of 2% and will follow a data-driven, meeting-by-meeting approach to determine the appropriate monetary policy stance.
He continued: In particular, the Board of Governors’ decisions on interest rates will be based on its assessment of inflation expectations in light of incoming economic and financial data, the dynamics of core inflation and the strength of monetary policy transmission. The Board of Governors does not commit in advance to a particular interest rate path.
Interest rates on the Deposit Facility, Principal Refinancing Facility and Margin Lending Facility will be reduced to 3.00%, 3.15% and 3.40%, respectively, effective December 18, 2024.
