The European
Central Bank (ECB) lowered its deposit facility rate by 25 basis points to 3.25
per cent on Thursday, as widely expected. That marked the third straight rate
reduction by the ECB this year.
In addition, the
ECB’s interest rates on its main refinancing operations and marginal lending
facility were cut by 25 basis points each to 3.40 per cent and to 3.65 per
cent, respectively. Those decreases also matched markets’ forecasts.
In its policy
statement, the ECB noted:
- today's decision to lower the deposit facility rate is
based on its updated assessment of the inflation outlook, the dynamics of
underlying inflation and the strength of monetary policy transmission;
- Incoming information on inflation shows that the
disinflationary process is well on track;
- Inflation
outlook is also affected by recent downside surprises in indicators of economic
activity;
- Financing
conditions remain restrictive;
- Inflation is
expected to rise in the coming months, before declining to 2% target in the
course of next year;
- Domestic
inflation remains high, as wages are still rising at an elevated pace;
- Labour cost
pressures are set to continue easing gradually;
- Governing
Council is determined to ensure that inflation returns to its 2% medium-term
target in a timely manner;
- Governing
Council will keep policy rates
sufficiently restrictive for as long as necessary to achieve this aim;
- 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;
- Governing
Council stands ready to adjust all of its instruments within its mandate to
ensure that inflation returns to its 2% target