The ECB cut interest rates by 0,25%. This is the third reduction of the year, the second consecutive, after those made in June and September. With today's decision, the Deposit rate drops to 3,25%, the rate on the main refinancing operations at 3,40% and the rate on the marginal lending facility at 3,65%.
The choice it was expected by the markets, which are travelling sharply upwards, with analysts having unanimously predicted the cut in light of the latest inflation data and growing fears for the stability of the economy.
ECB: “2% target reached during the next year”
“The decision to reduce the deposit facility rate, the rate through which the Governing Council steers monetary policy, follows the updated assessment of the inflation outlook, underlying inflation dynamics and the strength of monetary policy transmission,” the ECB Governing Council explained at the end of its meeting in Ljubljana, Slovenia.
Speaking of prices, central bankers point out that “the disinflationary process is well underway. The inflation outlook is also influenced by recent Downside surprises in indicators of economic activity. At the same time, financing conditions remain restrictive.”
Prices, according to the ECB, could increase in the coming months, "then decrease" and reach the target of 2% “over the next year” while in September it was indicated as “the second half” of 2025.
“Domestic inflation remains high, as wages continue to rise at a sustained pace. At the same time, pressures on labor costs should continue to gradually ease, in a context in which profits partially mitigate their impact on inflation”, reads the note, in which the Eurotower once again confirms its intention to keep “the key rates at sufficiently restrictive levels for as long as necessary to achieve this goal” and reiterates the “data-driven approach on the basis of which decisions are defined from time to time at each meeting”. Therefore, there is no constraint on a “particular path of rate reduction”.
