European Central Bank Cuts Key Interest Rates by 0.25%
The European Central Bank (ECB) has announced a decision to lower its three key interest rates by 25 basis points. This marks the first rate cut since 2019.
The decision comes after nine months of holding rates steady and is based on an updated assessment of the inflation outlook and the strength of monetary policy transmission.
Key points:
- The ECB lowered the interest rates on the main refinancing operations, effective June 12, 2024.
- Inflation has fallen by more than 2.5 percentage points since the September 2023 Governing Council meeting.
- Underlying inflation has eased.
In a press release, the ECB stated that it is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady.
11 countries cut interest rates in 2024
According to the data collected by MilkRoad, 11 countries has cut their interest rates in 2024, as seen below.
Coming back to ECB, despite the progress made in recent quarters, the ECB noted that domestic price pressures remain strong.
TheĀ ECBĀ underscoredĀ itsĀ commitmentĀ toĀ seeĀ inflationĀ returnĀ toĀ itsĀ medium-termĀ targetĀ ofĀ 2%Ā inĀ aĀ timelyĀ way. They also stated that it will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim.Ā
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The European Central Bank (ECB) said that, in addition to the interest rate decision, the Eurosystem will, during the second half of the year, lower its holdings of securities under the pandemic emergency purchase program (PEPP) by an average of ā¬7.5 billion each month.
The ECB’s decision to lower interest rates comes as a welcome relief for borrowers. It is also expected to provide some support to the economy, which is projected to pick up to 0.9% in 2024, 1.4% in 2025, and 1.6% in 2026.Ā
