span>span>Thursday 12th September 2024/span>span> - 13:45 (BST)/span>/span>
The European Central Bank (ECB) has eased its monetary policy, cutting the deposit facility rate by 25 basis points to 3.5%. This adjustment, effective from September 18, reflects an updated inflation outlook and improved policy transmission. The main refinancing rate was also lowered to 3.65%, while the marginal lending rate was reduced to 3.90%.
The ECB remains steadfast in its goal of returning inflation to the 2% target, with future rate moves dependent on economic data. Inflation forecasts for the coming years remain largely unchanged, with 2.5% expected in 2024, 2.2% in 2025, and 1.9% in 2026. However, the bank anticipates a short-term uptick as the effects of falling energy prices fade from year-on-year comparisons.
Core inflation is projected to ease from 2.9% this year to 2% by 2026, despite rising inflation in services. Domestic pressures persist due to wage growth, though moderating labour costs and stable corporate profits are expected to temper broader inflationary risks.
Markets will watch closely for further shifts in the ECB’s tightening trajectory as the euro faces ongoing scrutiny in the FX markets amid policy recalibrations. Euro demand saw little change following today’s widely expected move by the ECB, with attentions now turning to both the Federal Reserve and Bank of England interest rate announcements next week.
