Published September 13, 2024 10:30 am est
by Richard F. Cason, 
Editor in Chief,
NewsMovesmarketsForex
Key Issues-
- ECB cut deposit facility rate by 25 bps to 3.65% on September 12, 2024
- ECB also reduced the Interest rates by 60 bps to 3.50% for September 2024 as well
- ECB also cut the Marginal Lending Facility rate by 60 bps to 3.90%
- The reason for the 60 bps interest rate reduction was primary based on modest decline in the rate of inflation with in Euro Zone which is currently 2.5% which aligns with the 2024 ECB economic projections
*ECB Lowers Deposit Facility Rate Amid Revised Inflation Outlook
The European Central Bank lowers the interest rates by 60 base points to 3.50% as well as the Deposit facility rate by 25 bases points to 3.65% on September 12, 2024. This is due to the rate of inflation moderating in key areas of the economy in alignment with the Councils economic projections for the year.
Live Video coverage of European Central Bank President Christine Lagarde press conference, Announcing lower Euro Zone interest rates t0 3.50% and Deposit facility rate to 3.65% on September 12, 2024
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Euro Zone inflation rate aligns with ECB Expectations Anticipated at an Average of 2.5% for 2024
In a significant move to recalibrate its monetary policy, the European Central Bank (ECB) Governing Council in Frankfurt Germany has announced a 25 basis point reduction in the deposit facility rate, a key tool for steering monetary policy.
This decision reflects the Council’s updated assessment of inflation trends and the overall economic landscape. Recent inflation data aligns with expectations, prompting the ECB staff to project headline inflation at an average of 2.5% for 2024, slightly lower than previous estimates, with further declines anticipated to reach 1.9% by 2026.
The Council noted that inflation is likely to rise temporarily later this year due to the waning effects of prior decreases in energy prices. While domestic inflation pressures persist, driven by rising wages, the rate of increase is beginning to moderate. The ECB indicated that profit margins are helping to cushion the impact of wage growth on overall inflation. Economic projections suggest modest growth of 0.8% in 2024, with a gradual increase to 1.5% by 2026, although these figures reflect a slight downward revision from earlier forecasts.
The Governing Council emphasized its commitment to achieving a stable inflation rate of 2% over the medium term, stating that it will maintain sufficiently restrictive policy rates for as long as necessary. Future interest rate decisions will be made based on ongoing assessments of economic data and inflation dynamics. In a related operational update, the ECB confirmed that changes to its monetary policy framework will be implemented on September 18, including adjustments to the interest rate spreads between key facilities, designed to enhance the effectiveness of its monetary policy transmission.
The ECB’s latest decisions underscore a strategic approach to navigating the complex economic conditions in the Eurozone, aiming to balance inflation control with sustainable economic growth.
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