European Central Bank lowers key rates as inflation outlook improves

18 Oct '24

1 min read

European Central Bank lowers key rates as inflation outlook improves

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ECB has cut its key interest rates by 25 basis points, effective October 23.
Rates for the deposit facility, main refinancing operations, and marginal lending will fall to 3.25 per cent, 3.40 per cent, and 3.65 per cent, respectively.
While inflation remains high due to rising wages, the ECB expects pressures to ease and inflation to return to target levels in 2025.

The Governing Council of the European Central Bank (ECB) has announced a 25-basis point reduction in its three key interest rates, effective from October 23, 2024. The rates on the deposit facility, main refinancing operations, and marginal lending facility will be decreased to 3.25 per cent, 3.40 per cent, and 3.65 per cent, respectively.

This decision comes as the ECB reassesses inflation trends, noting that disinflation is progressing as expected. The ECB highlighted that the inflation outlook is influenced by recent economic activity, which has surprised on the downside. Despite ongoing high domestic inflation driven by rising wages, labour cost pressures are expected to gradually ease, the Governing Council said in a statement.

While inflation is anticipated to rise temporarily in the coming months, it is forecast to fall back to target levels next year. The ECB reaffirmed its commitment to returning inflation to its 2 per cent medium-term goal and will maintain restrictive monetary policies until this target is met. The Governing Council stressed that future rate decisions will remain data-driven, without pre-committing to a specific policy trajectory.

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