Financial News: ECB Set To Cut Key Rates By 25

ECB Set To Cut Key Rates By 25 Bps

06/06/2024 - 03:21:00 (RTTNews)

(RTTNews) - The European Central Bank is set to lower its key interest rates by 25 basis points on Thursday, ending the rate hiking cycle that began in July 2022.

As the rate hike is widely priced in, markets focus more on tweaks to the policy statement and the future path of easing in the second half of the year.

The deposit rate currently stands at a record high 4.00 percent. A 25 basis point cut to the deposit rate will be the first reduction since September 2019.

The bank is also set to reduce the main refinancing rate, or refi, by a quarter to 4.25 percent and the lending rate to 4.50 percent.

The policy announcement is due at 8.15 AM ET. Following the meeting, ECB Chief Christine Lagarde holds press conference at 8.45 am ET.

As <a href=https://www.rttnews.com/3451557/eurozone-inflation-rises-ahead-of-ecb-meeting.aspx target=_blank >inflation</a> accelerated to 2.6 percent in May on higher services costs, the ECB is likely to pause the rates in July.

Earlier, ING economists said a back-to-back cut in July is deemed unlikely, with markets attaching only a roughly 10 percent chance to that scenario.

They noted that a second reduction is almost fully priced by October, but it is a third cut this year that is hanging in the balance.

Capital Economics' economist Andrew Kenningham said despite an acceleration in inflation in May, the disinflation process is broadly on track. The economist expects a total of four 25 basis point rate cuts this year, which would ultimately bring the deposit rate down to 3.00 percent by December.

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