Deposit rate: 4 to 3,75%. Main refinancing rate: 4,50 to 4,25%. Marginal lending rate: 4,75% to 4,50%. As widely expected, after three years the era of restrictive policy ends and the era of monetary easing begins.
The European Central Bank cut interest rates by 25 basis points for the first time since 2016 and the Bags, which had already largely digested the move in recent weeks, continue to rise without shocks. The wait, in fact, is all projected onto words that Christine Lagarde will pronounce during the press conference underway in Frankfurt. Not a single more word from the Governing Council's statement: the next decisions, the central bankers underline once again, will be taken "meeting after meeting" also because “Price pressures remain strong, as wage growth remains high and inflation is likely to remain above target levels into next year.”
Monetary easing therefore risks being slow. "It seems It is unlikely that the ECB will carry out more than two rate cuts alone before the Fed starts this year. – says S&P – Furthermore, the Fed's rate cuts are expected to continue until 2026, well beyond the completion of the cuts by the ECB”. The upwardly revised inflation forecasts also confirm the hypothesis. “Assuming inflation aligns to targets and growth reaches potential by the middle of next year, as expected, it is likely that ECB limits rate cuts to no more than one per quarter until the third quarter of 2025, with a minimum deposit rate of 2,5%,” continues the racing agency.
ECB: “It is appropriate to moderate the degree of restriction of monetary policy”
“Based on an updated assessment of the inflation outlook, underlying inflation dynamics and the intensity of monetary policy transmission, it is now appropriate moderate the degree of tightening of monetary policy after nine months of unchanged interest rates", we read in the ECB press release, with the Governing Council underlining: "Since September 2023, inflation has fallen by more than 2,5 points percentages and inflation prospects have improved significantly. Core inflation also fell, reinforcing signs of easing price pressures, and inflation expectations have declined across all horizons. Monetary policy has kept financing conditions restrictive." “By curbing demand and ensuring that inflation expectations remained well anchored – adds the Eurotower – this contributed significantly to the reduction of inflation”.
ECB: new forecasts on inflation and GDP
“Despite the progress made in recent quarters, it persists strong internal pressures on prices because wage growth is high; inflation will likely remain above target until much of next year", explains the ECB which then moves on to the percentages.
The Eurotower forecasts inflation growth of 2,5% in 2024, 2,2% in 2025 and 1,9% in 2026, while core inflation estimates speak of 2,8% in 2024, 2,2% in 2025 and 2,0% in 2026. In March, Central Bank experts had forecast inflation growth of 2,3% in 2024, 2,0% in 2025 and 1,9. 2026% in 2,6, while core inflation estimates were for growth of 2024% in 2,1, 2025% in 2,0 and 2026% in XNUMX.
As regards the GDP, instead, the ECB expects growth in the Eurozone's gross domestic product of 0,9% in 2024, 1,4% in 2025 and 1,6% in 2026. In March, experts had predicted growth of GDP equal to 0,6% in 2024, 1,5% in 2025 and 1,6% in 2026.
