The European
Central Bank (ECB) reduced its deposit facility rate by 25 basis points to 2.50
per cent on Thursday, as widely anticipated. That marked the sixth rate decrease
by the ECB since it started easing its monetary policy in June 2024.
In addition, the
ECB’s interest rates on its main refinancing operations and marginal lending
facility were cut by 25 basis points each to 2.65 per cent and to 2.90 per
cent, respectively. Those moves were also in line with markets’ expectations.
In its policy
statement, the ECB noted:
-
Today’s decision is based on its updated assessment of the inflation outlook,
the dynamics of underlying inflation and the strength of monetary policy
transmission;
- Disinflation process in the euro area is well on track;
- Inflation has continued to develop broadly as staff
expected;
-
Headline inflation is seen to average 2.3% in 2025, 1.9% in 2026 and 2.0% in
2027. The upward revision for 2025 reflects stronger energy price dynamics;
-
Excluding energy and food, inflation projected to average 2.2% in 2025, 2.0% in
2026 and 1.9% in 2027;
-
Most measures of underlying inflation suggest that inflation will settle at
around the Governing Council’s 2% medium-term target on a sustained basis;
- Domestic inflation remains high;
- Wage growth is moderating as expected, and profits are partially buffering the impact on
inflation;
- Monetary policy is becoming meaningfully less restrictive;
- Eurozone's economy faces continued challenges;
- Growth projections were again lowered
markedly down – to 0.9% for 2025, 1.2% for 2026 and 1.3% for 2027. The downward
revisions for 2025 and 2026 reflect lower exports and ongoing weakness in
investment, in part originating from high trade policy uncertainty as well as
broader policy uncertainty;
-
Governing Council is determined to ensure that inflation stabilises sustainably
at its 2% medium-term target;
-
Especially in current conditions of rising uncertainty, it 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;
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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