FRANKFURT (GERMANY) (ITALPRESS) – The Governing Council of the European Central Bank has decided to cut its three key interest rates by 25 basis points. Specifically, the decision to reduce the rate on deposits with the central bank, through which the Governing Council guides monetary policy, stems from the updated assessment of the inflation outlook, the dynamics of core inflation and the intensity of monetary policy transmission.Interest rates on deposits with the central bank, the main refinancing operations and the marginal lending facility will be reduced to 2.75 percent, 2.90 percent and 3.15 percent, respectively, effective Feb. 5, 2025. “The disinflationary process is well on track,” the ECB stresses. “Inflation has continued to evolve broadly in line with our experts’ projections and is expected to return to the Governing Council’s target of 2 percent over the medium term later this year. Measures of core inflation mostly suggest that it will remain firmly around the target. Domestic inflation remains high, mainly because wages and prices in certain sectors are still adjusting to past inflation increases with considerable lag. However, wage growth is moderating as expected, and profits are partially cushioning the impact on inflation. “Recent interest rate cuts decided by the Governing Council are gradually making new lending to businesses and households less onerous,” the European Central Bank further explains. “At the same time, financing conditions remain tight, partly because monetary policy remains tight and past interest rate hikes are still being transmitted to outstanding loans; some maturing loans are therefore being rolled over at higher rates. The economy is still facing adverse circumstances, but rising real incomes and the gradual fading of the effects of restrictive monetary policy should support demand growth over time. “The Governing Council is determined “to ensure that inflation stabilizes durably on its 2 percent medium-term target. To set the appropriate monetary policy stance, it will follow a data-driven approach under which decisions are taken from time to time at each meeting. In particular, the Governing Council’s decisions on interest rates will be based on its assessment of the inflation outlook, given new economic and financial data, the dynamics of core inflation, and the intensity of monetary policy transmission, without tying itself to a particular rate path.”
– Photo Agency Photogram –
(ITALPRESS).
