URGENT: ECB cuts interest rates as inflation eases below target

The European Central Bank (ECB) lowered interest rates again on Thursday and signalled “the disinflationary process is well on track.”

The ECB lowered the three key ECB interest rates by 25 basis points. Accordingly, the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility are lowered to 3.25 per cent, 3.40 per cent, and 3.65 per cent, respectively, with effect from 23 October 2024.

Annual inflation rate in the euro area eased to 1.7 per cent in September, coming in below the central bank’s 2 per cent target for the first time in three years.

The 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.

The ECB’s Governing Council said the inflation outlook is also affected by recent downside surprises in indicators of economic activity.

Despite these developments, 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 statement read.

Attribution: ECB