ECB: Key Interest Rates Cut by 25BP; Projections Revised Up

6 June 2024

By Isabel Teles – FRANKFURT (Econostream) – The European Central Bank’s Governing Council on Thursday decided to cut its key interest rates by 25bp, as widely expected by markets and analysts.

‘Based on an updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady’, the ECB said in a press release.

Underlying inflation had eased, reinforcing signs of weakened price pressures, the ECB said, noting that inflation expectations had also declined.

The June projections for headline and core inflation were revised upwards compared to March, the ECB said.

The ECB now projects HICP of 2.5% in 2024, 2.2% in 2025 and 1.9% in 2026, with the measure ex-energy and food at 2.8% in 2024, 2.2% in 2025 and 2.0% in 2026. Economic growth would pick up to 0.9% in 2024, 1.4% in 2025 and 1.6% in 2026, according to the updated forecasts.

The ECB also confirmed the reduction of the Eurosystem’s holdings of securities under the pandemic emergency purchase programme (PEEP) by €7.5 billion per month on average over the second half of the year, according to the press release.

With the cut, the three key ECB interest rates, effective from 12 June, are at 4.25% for the main refinancing operations, 4.50% for the marginal lending facility, and at 3.75% for the deposit facility.