The European
Central Bank (ECB) reduced its deposit facility rate by 25 basis points to 3.00
per cent on Thursday, as widely anticipated. That marked the fourth rate decrease
by the ECB this year.
In addition, the
ECB’s interest rates on its main refinancing operations and marginal lending
facility were lowered by 25 basis points each to 3.15 per cent and 3.40 per
cent, respectively. Those moves also were in line with markets’ expectations.
In its policy
statement, the ECB noted:
- Today’s
decision is based on the updated assessment of inflation outlook, dynamics of
underlying inflation and strength of monetary policy transmission;
- Disinflation
process is well on track;
- Central bank’s
staff sees headline inflation averaging 2.4% in 2024, 2.1% in 2025, 1.9% in
2026 and 2.1% in 2027;
- For inflation
excluding energy and food, staff projects an average of 2.9% in 2024, 2.3% in
2025 and 1.9% in both 2026 and 2027;
- Most measures
of underlying inflation suggest that inflation will settle at around Governing
Council’s 2% medium-term target on a sustained basis;
- Financing
conditions are easing but continue to be tight because monetary policy remains
restrictive;
- Staff now
expects a slower economic recovery than in the September projections. The
economy is now seen growing by 0.7% in 2024, 1.1% in 2025, 1.4% in 2026 and
1.3% in 2027;
- Gradually
fading effects of restrictive monetary policy should support a pick-up in
domestic demand;
- Governing
Council is determined to ensure that inflation stabilises sustainably at its 2%
medium-term target;
- Governing
Council will follow a data-dependent and meeting-by-meeting approach to
determining the appropriate monetary policy stance;
- Governing
Council is not pre-committing to a particular rate path
- Governing
Council stands ready to adjust all of its instruments within its mandate to
ensure that inflation stabilises sustainably at its 2% target over the medium
term