ECB cuts key interest rates again

On December 12 this year, the European Central Bank (ECB) again cut all three key interest rates by 25 basis points (bps). This is stated in the regulator’s message.

The deposit rate is now 3%, the main refinancing rate is 3.15%, and the margin loan rate is 3.4%.

In particular, the decision to reduce the deposit rate is based on an updated assessment of the inflation forecast, the dynamics of core inflation and the strength of monetary policy transmission.

According to the ECB, the process of disinflation is proceeding properly. The regulator predicts that headline inflation will average 2.4% in 2024, 2.1% in 2025, 1.9% in 2026, and 2.1% in 2027, when the EU’s expanded emissions trading system comes into effect.

Most of the data on core inflation indicate that inflation will stabilize around the medium-term target of 2% on a sustainable basis, the regulator said in a statement.

The decision of the European Bank coincided with the expectations of analysts and market participants. The ECB has been cutting borrowing costs for the fourth time since June, which, according to the Financial Times, brought the benchmark deposit rate to its lowest level since March 2023.

The regulator abandoned the wording that the policy will remain sufficiently restrictive for as long as necessary. Instead, it emphasized that the effects of restrictive monetary policy would gradually fade over time.

As GMK Center reported earlier, inflation in the euro area rose by 2.3% in November 2024 compared to the same month in 2023. Thus, the indicator accelerated the growth rate compared to October, when it amounted to +2% y/y.