Confirming market expectations, the European Central Bank (ECB) decided this Thursday to lower its main reference interest rate for the third meeting in a row, taking another step towards ending the imposition of restrictive measures to control inflation.
At the end of the meeting held in Frankfurt, the members of the board of governors of the institution announced in a statement that its deposit interest rate – which is currently the main benchmark for funding costs in the eurozone – It goes from 3.25% to 3%, a decrease of 0.25 percentage points which is in line with what the vast majority of analysts were expecting for this meeting.
After making the first rate cut in June and, in the most recent meetings in September and October, opting for cuts of 0.25 percentage points, the markets were skeptical a few weeks ago as to whether the ECB could go further this time, which led to yes. a decrease of 0.5 percentage points. However, facing a state of uncertainty in the world economy, especially the inauguration of the new administration in the White House, Christine Lagarde and her peers chose prudence, keeping the same pace to remove monetary restrictions in the euro zone.
In the statement, central bank officials say that “the disinflation process is on track,” adding that most core inflation measures point to inflation hovering around the ECB Board’s target durable.
And, as if to confirm this analysis, the central bank also presented new forecasts for the eurozone economy that suggest lower inflation rates and less variation in gross domestic product (GDP). ECB technicians now estimate that inflation will rise from 2.4% in 2024 to 2.1% in 2025, but in September they pointed to values of 2.5% this year and 2.2% next year. It is always hoped that, i 2026, inflation will be a little below the 2% target..
When it comes to economic growth, the central bank is more pessimistic. It predicts that the euro area economy will grow by 0.7% this year and 1.1% next year, when in September, it pointed to GDP variations of 0.8% and 1.3% in 2024 and 2025, respectively.
Early this Thursday evening, the president of the ECB, Christine Lagarde, will explain the decision taken in more detail, simultaneously occurring that the central bank’s full projections for the euro zone economy will be presented.