New cut, from 25 basis points. The third since June. The European Central Bank raised deposit rates to 3.25%, the refinancing rate to 3.40% and the lending rate deposit facility at 3.65%. Above all, it allows us to imagine that the restrictive monetary policy maneuver could end a little earlier: the 2% target will be reached, explains the statement published at the end of the meeting, «during the next year» and in September «second half» of 2025.
“All the indications we got in the five weeks after the last meeting on monetary policy were pointing in the same direction: down,” President Christine Lagarde explained at a press conference. The decision to cut 25 basis points was taken unanimously, albeit after extensive discussion. However, the other rate moves will continue to be made on a “meeting by meeting” basis, based on the data. “We have not opened the door to anything,” said Lagarde, referring above all to the choice to reduce the official cost of credit in a meeting that did not include – as happens every three months – the publication of economic projections.
The decision was taken in light of a new assessment of the inflation outlook, following the September figure – an increase in the index of 1.7% per year – and signs of a slowdown in economic activity (which is cooling, and to what extent) . cooling, prices): the volatility of industrial production and the slow growth of services after a strong summer season and consumption increased less than expected. Risks to growth remain focused on the downside. However, Lagarde specified, the ECB continues to not “see” a retreat: the soft landing is still the basic scenario.
Meanwhile, inflation is expected to rise in the coming months, before falling, due to purely arithmetic factors, compared to 2023 characterized by falls in energy prices. Wages “continue to increase at a high rate” although pressure from labor costs is expected to continue to decline gradually, and profits “partially” absorb their impact on inflation. Monetary policy remains restrictive.