On Thursday 12th September, the European Central Bank (ECB) announced a reduction in its main interest rate by 0.25 points, responding to declining inflation but without committing to the future direction of monetary easing. « It is now appropriate to take a further step in reducing the restrictive nature of monetary policy, » the decision’s statement reads.
The deposit facility rate, which had risen to 4%, its highest level since the euro’s inception in 1999, consequent to ten consecutive borrowings cost increases between July 2022 and September 2023, now drops to 3.5%, following a 25 basis points reduction decided in June. Both the refinancing rate and the marginal lending facility rate have been lowered to 3.65% and 3.9% respectively.
By lowering its benchmark rate, the ECB will affect borrowing conditions between banks and consequently, the borrowing conditions in general, providing mild relief to ease tensions over mortgage credit and corporate loans.
The Consumer Price Index in the eurozone (HICP), calculated to European standards, slowed down to 2.2% annually in August, its lowest level in three years, while the ECB’s medium-term inflation target is 2%.
La Banque Centrale Européenne a récemment réajusté à la baisse ses anticipations de croissance économique pour l’année en cours, tout en maintenant son pronostic que l’inflation restera majoritairement en adéquation avec son but de 2% d’ici la fin de l’année 2025. Il est prévu que l’inflation atteigne 2,2% l’année suivante, un taux qui dépasse le but de la BCE. Cependant, l’évolution des prédictions indique une régression vis-à-vis de l’objectif pendant la seconde moitié de l’année.