ECB cuts interest rates by 0.25 points as inflation slows in Europe

ECB cuts interest rates by 0.25 points as inflation slows in Europe
ECB cuts interest rates by 0.25 points as inflation slows in Europe


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“The disinflation process is on track,” underlines the board of governors in a press release published this Thursday.

New strong decision for the ECB. This Thursday, the governing council of the European Central Bank announced a new cut in its interest rates, the fourth this year. These, including its main rate, the deposit rate, serving as a reference for credit conditions in the economy, thus decrease by 25 basis points. «The interest rates of the deposit facility, the main refinancing operations and the marginal lending facility will be reduced to 3.00%, 3.15% and 3.40% respectively from December 18, 2024.summarizes the institution in a press release.

This decision, which must “promote a recovery in demand”was taken after several rate increases, when Europe was facing high inflation, coming out of the Covid-19 pandemic. Since then, inflation has slowed significantly across Europe, including in . “The disinflation process is on track”recognizes the Governing Council, which believes that the rate should stabilize “sustainably” around 2%. It therefore expects a rate established at «2.4% in 2024, 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027».

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Risks oriented downwards

The Governing Council also notes a “slow-down” of European economic activity and estimates growth at 0.7% in 2024, then 1.1%, 1.4% and 1.3% respectively over the next three years. “The anticipated recovery would be based mainly on the rise in real wages, which should allow households to increase their consumption, and on the increase in business investment”estimates the ECB.

“Faced with sluggish demand and very uncertain prospects, companies are restricting their investment spendingnoted for her part Christine Lagarde. European exports are also at half mast and the competitiveness of certain sectors of activity is faltering.. Trade tensions, deterioration of confidence, war in Ukraine or conflict in the Middle East, climate crisis… The risks weighing on the continent's economy, although still present, are however on a downward trend, believes the president.

The Central Bank, which was hesitating between a cut of 25 or 50 basis points, therefore chose a more measured decline. She also specifies that she does not commit to “a particular rate trajectory”leaving the door open to other developments.

France

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