The European
Central Bank (ECB) cut its deposit facility rate by 25 basis points to 2.25 per
cent on Thursday, as widely expected. That marked the seventh rate reduction by
the ECB since it started easing monetary policy in June 2024.
In addition, the
ECB’s interest rates on its main refinancing operations and marginal lending
facility were lowered by 25 basis points each to 2.40 per cent and to 2.65 per
cent, respectively. Those moves were also in line with markets’ forecasts.
In its policy
statement, the ECB noted:
- Today’s
decision to lower the deposit facility rate is based on its updated assessment
of the inflation outlook, the dynamics of underlying inflation and the strength
of monetary policy transmission;
- Disinflation process is well on track;
-
Inflation has continued to develop as staff expected, with both headline and
core inflation declining in March;
-
Services inflation has also eased markedly over recent months;
-
Most measures of underlying inflation suggest that inflation will settle at
around the ECB’s 2% medium-term target on a sustained basis;
-
Wage growth is moderating, and profits are partially buffering the impact of
still elevated wage growth on inflation;
- Euro area economy has been building up some
resilience against global shocks, but the outlook for growth has deteriorated
owing to rising trade tensions;
-
Increased uncertainty is likely to reduce confidence among households and
firms, and the adverse and volatile market response to the trade tensions is
likely to have a tightening impact on financing conditions. These factors may
further weigh on the economic outlook for the euro area;
-
Governing Council is determined to ensure that inflation stabilises sustainably
at its 2% medium-term target;
-
Especially in current conditions of exceptional uncertainty, Governing Council will follow a
data-dependent and meeting-by-meeting approach to determining the appropriate
monetary policy stance;
-
Governing Council’s interest rate decisions will be based on its assessment of
the inflation outlook in light of the incoming economic and financial data, the
dynamics of underlying inflation and the strength of monetary policy
transmission;
- 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