Financial News: ECB Cuts Deposit Rate To 3.00%

ECB Cuts Deposit Rate To 3.00%

(RTTNews) - The European Central Bank lowered its key interest rate by 25 basis points again, in line with economists' expectations, as policymakers assessed that the disinflation process is on track though growth concerns remain.

The Governing Council, led by ECB President Christine Lagarde, cut the key policy rate - the deposit rate - by a quarter-basis point to 3.00 percent on Thursday. The previous change was <a href=https://www.rttnews.com/3482213/ecb-cuts-interest-rates-by-25-bps-as-lagarde-airs-concern-on-eurozone-growth.aspx?refresh=1 target=_blank >a reduction by the same volume in October</a> following <a href=https://www.rttnews.com/3474832/ecb-cuts-interest-rates-on-weaker-eurozone-growth-outlook.aspx?refresh=1 target=_blank >a similar cut in September</a>.

The main refinancing rate or the refi was reduced to 3.15 percent and the marginal lending facility rate to 3.40 percent.

"[The Governing Council] will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance," the ECB said.

ECB policymakers will base their interest rate decisions on the "assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission", the bank added.

"The Governing Council is not pre-committing to a particular rate path," the ECB said.

In its latest round of macroeconomic projections, unveiled on Thursday, the ECB staff forecast Eurozone headline inflation at 2.4 percent this year, 2.1 percent next year, 1.9 percent in 2026 and 2.1 percent in 2027.

Core inflation is projected at 2.9 percent this year, 2.3 percent next year, and 1.9 percent in both 2026 and 2027.

The euro area economy is projected to grow 0.7 percent this year, 1.1 percent next year, 1.4 percent in 2026 and 1.3 percent in 2027.

"Staff now expect a slower economic recovery than in the September projections," the bank said.

"The projected recovery rests mainly on rising real incomes - which should allow households to consume more - and firms increasing investment," the ECB said. The central bank expects the gradually fading effects of restrictive monetary policy to support a pick-up in domestic demand.

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