The second cut has arrived. As expected, the ECB has decided to cut rates by 0,25%. The deposit rate therefore goes from 3,75% to 3,50%, the one on main refinancings, due to the technical adjustment caused by the new operating framework, goes from 4,25% to 3,65%, while the one on marginal loans (for the same reason), goes from 4,50% to 3,90%.
Today is the second snip of the year. The first one arrived in June after three years of restrictive monetary policy. The forecasts for the near future? The European Central Bank should make the third and final cut of the year in December, always by 25 basis points. For 2025, however, cuts are expected on a quarterly basis, barring negative indications on prices that could open the possibility of more frequent cuts.
The ECB and the new operating framework
As mentioned, if the deposit rate – which has been the reference rate for the cost of money for years – has fallen by 25 basis points, with Thursday's meeting it came into force the new regime with which the ECB directs monetary policy. With the result that the rate on refinancing to banks will not fall by 25, but by 60 basis points: 25 of which are due to a reduction in the cost of money, and 35 due to a technical adjustment expected from the new “operational framework” announced by the ECB in March.
Inflation at 2,5% in 2025
The ECB has alsoand confirmed the inflation estimate Eurozone inflation for 2024: prices will remain at 2,5%, the same percentage indicated in June. The estimate for 2025 also remains the same as in June, with inflation expected at 2,2%, and that for 2026, at 1,9%.
Inflation – explains the Eurotower in a note – “should start to increase again in the last part of this year, also because the previous sharp drops in energy prices will no longer affect the rates calculated over the twelve months”, and then “decrease until reaching our objective in the second half of next year”.
