ECB lowers key rate to 3.25% in third cut this year

October 18, 2024 (MLN): The European Central Bank on Thursday cut its key interest rate by 25 basis points to 3.25%, in its third reduction of the year.

"The Governing Council today decided to lower the three key ECB interest rates by 25 basis points," it said in a statement.

Accordingly, the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will be decreased to 3.25%, 3.40% and 3.65% respectively, with effect from October 23, 2024.

In particular, the decision to lower the deposit facility rate – the rate through which the Governing Council steers the monetary policy stance – is based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it noted.

The incoming information on inflation shows that the disinflationary process is well on track.

The inflation outlook is also affected by recent downside surprises in indicators of economic activity. Meanwhile, financing conditions remain restrictive.

Inflation is expected to rise in the coming months, before declining to target in the course of next year.

Domestic inflation remains high, as wages are still rising at an elevated pace.

At the same time, labour cost pressures are set to continue easing gradually, with profits partially buffering their impact on inflation.

The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner.

It will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim.

The Governing Council will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction.

In particular, its interest rate decisions will be based on its 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 Governing Council is not pre-committing to a particular rate path.

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