ECB Cuts Rates by 25BP as Disinflation Is ‘Well on Track’

17 October 2024

By Marta Vilar – MADRID (Econostream) - The European Central Bank’s Governing Council decided on Thursday to cut each of its three key interest rates by 25bp, as widely expected by markets and analysts.

‘The incoming information on inflation shows that the disinflationary process is well on track’, the ECB said in its monetary policy statement.

Economic weakness seen in some recent data also impacted the inflation outlook, according to the ECB.

The European Central Bank ‘will keep policy rates sufficiently restrictive for as long as necessary to achieve' the timely return of inflation to the 2% medium-term target, the statement said.

With the cut, the three ECB interest rates, effective from 23 October, will be lowered to 3.25% for the deposit facility, 3.40% for the rate on main refinancing operations and 3.65% for the rate on the marginal lending facility.

‘Inflation is expected to rise in the coming months, before declining to target in the course of next year’, the press release said.

No macroeconomic projections were due this meeting. In September the ECB maintained its forecast for headline inflation but core HICP was revised upwards while economic growth was revised downwards.

The ECB projected HICP of 2.5% in 2024, 2.2% in 2025 and 1.9% in 2026, with the measure ex-energy and food at 2,9% in 2024, 2.3% in 2025 and 2.0% in 2026. Economic growth was forecasted at 0.8% in 2024, 1.3% in 2025 and 1.5% in 2026, according to September’s projections. The new round is due in December.