The ECB cut all three key interest rates

The European Central Bank (ECB) has cut all three key interest rates. This decision was made following a meeting on 12 September 2024, the ECB said in a statement.

The deposit rate was cut by 25 basis points to 3.5%.

In March, the regulator announced that the difference between the main refinancing operations (MRO) rate and the deposit rate would be reduced to 15 bps from 50 bps previously, and the difference between the margin loan rate and the deposit rate to 40 bps from 75 bps.

In accordance with these changes, which will come into force on 18 September, the main refinancing rate was reduced to 3.65%, and the margin loan rate – to 3.9%.

The ECB stressed that it will continue to monitor the incoming statistical data and will make decisions on rates at each meeting separately. The regulator has no pre-determined plan for a specific rate level in the future.

According to the report, recent inflation data were broadly in line with the ECB’s forecasts. Consumer price growth is expected to accelerate by the end of the year, in part due to a low comparison base, but by the second half of 2025, inflation will be at +2%.

At the same time, the ECB described the rate of wage growth in the euro area as ‘elevated’, but noted a slowdown in this indicator. Financial conditions in the currency bloc remain restrictive, and economic activity is subdued, reflecting weakness in consumer spending and investment.

‘The Governing Council of the European Central Bank is determined to achieve a timely slowdown in inflation to its medium-term target of 2%. We will keep key policy rates at a very restrictive level for as long as necessary to achieve this objective. Decisions on rates will be based, in particular, on assessments of the inflation outlook in light of emerging economic and financial data and on the development of core inflation,’ the statement said.

The ECB’s management is ready to adjust all instruments within its mandate to ensure that inflation returns to the 2% target, the regulator said.

In June, the European Central Bank cut key interest rates by 25 basis points for the first time since 2019. The ECB also raised its inflation forecast to 2.5% in 2024 from the previously expected 2.3%, and to 2.2% in 2025 from 2%. In addition, the regulator raised its forecast for eurozone GDP growth in 2024 to 0.9% from 0.6% expected in March, but lowered it for 2025 to 1.4% from 1.5%. In July, the ECB left key interest rates unchanged.