Ekonomické zprávy
06.06.2024

ECB cuts its key interest rates by 25 basis points

The European Central Bank (ECB) decreased its main refinancing rate by 25 basis points to 4.25 per cent on Thursday, as widely anticipated. The ECB’s interest rates on the marginal lending facility and the deposit facility were also lowered by 25 basis points each to 4.50 per cent and 3.75 per cent, respectively. This marked the ECB’s first interest-rate cut since 2019.

In its policy statement, the ECB noted:

- Based on an updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady;

- Despite the progress over recent quarters, domestic price pressures remain strong as wage growth is elevated, and inflation is likely to stay above target well into next year;

- Latest Eurosystem staff projections for both headline and core inflation have been revised up for 2024 and 2025 compared with the March projections;

- Eurozone's headline inflation is now predicted to average 2.5% in 2024, 2.2% in 2025 and 1.9% in 2026 while inflation excluding energy and food is projected to average 2.8% in 2024, 2.2% in 2025 and 2.0% in 2026;

- Eurozone's economic growth is expected to pick up to 0.9% in 2024, 1.4% in 2025 and 1.6% in 2026;

- ECB will keep policy rates sufficiently restrictive for as long as necessary to achieve its aim to return inflation to its 2% medium-term target;

- Governing Council confirmed that it will reduce the Eurosystem’s holdings of securities under the pandemic emergency purchase programme (PEPP) by EUR7.5 billion per month on average over the second half of the year;

- Governing Council stands ready to adjust all of its instruments within its mandate;

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

- Governing Council is not pre-committing to a particular rate path

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