ECB cuts key interest rates for the third time in a year

Inflation in the Eurozone fell below the target level in September

The European Central Bank (ECB) on October 17, as expected by analysts, lowered key interest rates by 25 basis points. This is stated in the notification of the regulator.

The new interest rates are set at 3.4% for main refinancing operations, 3.65% for margin loans and 3.25% for deposits. This is the third decrease in a row since June of this year.

As the regulator notes, the decision to lower the deposit rate is based on an updated assessment of the inflation forecast, the dynamics of core inflation and the strength of the transmission influence of monetary policy.

«Input information on inflation indicates that the disinflation process is on the right track. The inflation forecast is also affected by recent surprises in economic activity indicators. At the same time, financing conditions remain restrictive,» the ECB said in a statement.

The decision to reduce the cost of borrowing was made by the regulator against the backdrop of a slowdown in annual inflation in the Eurozone to a level of 1.7% in September against 2.2% in August of this year.

As noted by the ECB, inflation is expected to rise in the coming months and then decline to target levels over the next year. The regulator indicates that domestic inflation remains high as wages are still growing at a high rate. At the same time, there is a gradual easing of pressure in the field of labor costs.

«The Governing Council of the ECB intends to achieve a timely slowdown of inflation to the medium-term goal of 2%. We will keep key rates at a fairly restrictive level for as long as necessary to achieve this goal,» the European Central Bank said in a statement.

As GMK Center reported earlier, in August 2024, industrial production in the EU adjusted for seasonal changes, according to preliminary Eurostat data, increased by 1.3% compared to July, in the Eurozone – by 1.8% m/m. Compared to August 2023, industrial production in the Eurozone increased by 0.1%, in the EU by 0.2%.