ECB cuts key interest rates by 25 basis points

On January 30, the European Central Bank (ECB) again cut all three key interest rates by 25 basis points (bps). This is stated in the regulator’s report.

Starting February 5, the deposit rate will be 2.75%, the main refinancing rate will be 2.9%, and the margin loan rate will be 3.15%.

According to the ECB, the process of disinflation is proceeding properly. The inflation rate is in line with forecasts and should return to the medium-term target of 2% this year. Most indicators of core inflation indicate that it will remain steady around the target.

Domestic inflation remains high, largely because wages and prices in some sectors are still adjusting to the previous inflationary surge with a significant delay. However, the pace of wage growth is becoming more moderate, as expected.

“The Governing Council’s recent interest rate cuts are gradually making new borrowing less expensive for firms and households. At the same time, financing conditions continue to be tight, also because monetary policy remains restrictive,” the report says.

The economy, the regulator notes, is still facing challenges, but rising real incomes and the gradual fading of the effects of restrictive monetary policy should help boost demand over time.

The Governing Council of the ECB remains committed to stabilizing inflation at its medium-term target of 2% and is ready to adjust all available tools to achieve this. The regulator will continue to monitor statistical data and will make decisions on rates at each meeting separately.

As GMK Center reported earlier, the US Federal Reserve has kept the federal funds rate at 4.25-4.5% per annum.