European Central Bank lowers interest rates, growth forecasts

The interest rates on the main refinancing operations and the marginal lending facility will be decreased to 3.65 per cent and 3.90 per cent respectively. The changes will take effect from September 18.

The bank estimates that the eurozone economy will grow by 0.8 per cent in 2024, rising to 1.3 per cent in 2025 and 1.5 per cent in 2026.

Financing conditions remain restrictive, and economic activity is still subdued, reflecting weak private consumption and investment.

“Inflation is expected to rise again in the latter part of this year, partly because previous sharp falls in energy prices will drop out of the annual rates. Inflation should then decline towards our target over the second half of next year,” an ECB release said.

Headline inflation in the eurozone is projected to average at 2.5 per cent in 2024, 2.2 per cent in 2025 and 1.9 per cent in 2026, whereas core inflation is expected to see a rapid decline from 2.9 per cent this year to 2.3 per cent in 2025 and 2 per cent in 2026.

The governing council is determined to ensure that inflation returns to its 2-per cent medium-term target in a timely manner, the release added.

Fibre2Fashion News Desk (DS)