European Central Bank Cuts Rates by 0.25%

The European Central Bank (ECB) has cut interest rates by 0.25% as expected, marking the first cut since September 2019. 

Rates within the 20-nation euro zone have been at 4% since September 2023.

The central bank’s deposit facility rate will reduce from 4% to 3.75%, the marginal lending facility rate to 4.5%, and main refinancing options rate to 4.25%.

Christine Lagarde, President of the ECB said the dynamics of underlying inflation and the strength of the monetary policy position made it appropriate to reduce the rates after nine months after holding the rates steady.

Monetary policy has kept financing conditions restrictive by dampening demand, which has made a major contribution to bringing inflation back down, she said. 

“At the same time, domestic price pressure remain strong as wage growth is elevated and inflation is likely to stay above target well into next year,” she said.

She said bank staff see headline inflation at 2.5% this year, 2.2% in 2025 and 1.9% in 2026.

Economic growth is expected to pick up to 0.9% in 2024, 1.4% in 2025 and 1.7% in 2026.

She said the bank would keep policy rates restrictive ‘as long as necessary’ to achieve this. 

(Writing by Imogen Lillywhite; editing by Daniel Luiz  )

imogen.lillywhite@lseg.com

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