A “resilient” European economy and an inflation already “around the medium -term target of 2%” were not sufficient to convince the ECB to postpone a cut of the rates already widely discounted by the market, since the tensions deriving from “Uncertainties related to international trade” weigh on the prospects for growth and inflation of the euro area. This is what confirmed by President Christine Lagardein the press conference followed to the meeting of today’s monetary policy.
Rates adequate to navigate in uncertainty
The ECB has confirmed another today Tax cutting of 25 basis points It is revised the prospects of growth and inflation, making different and opposite scenarios in consideration. The president confirmed that “a further escalation of tensions on duties would cause lower growth and inflation levels” to the basic scenario.
For this reason the board intends to maintain a flexible settinglinked to the data and a decisive meeting after meeting. “With today’s cutting we are in a good position to navigate in uncertainty Which is on the horizon, “Lagarde specified.
Lagarde determined to end up a mandate
The president also answered a question about his future, after the rumors who spoke of his early exit for the World Economic Forum, reiterating that he was “Fully determined“To complete his mission and“ determined To complete the mandate until the deadline “.
The ECB decision on rates and QE
The Board of Directors therefore brought the rate on deposits at 2%, the one on the main refinancing operations at 2.15% and that on marginal refinancing operations at 2.40% starting from 11 June 2025.
As for Quantitative Easing programs, the ECB says that the activity of purchasing activities (Paa) and the purchase program for the pandemic emergency (Pepp) “They are reducing themselves to a measured and predictable rhythm”since the Eurotower no longer reinves the capital on the expiring titles.
The new projections of inflation and growth
Having noted that Inflation is currently Around the medium -term goal of 2%ECB economists outlined New macroeconomic forecasts: a basic scenario; A worsening scenario that provides for the further exacerbation of commercial tensions in the coming months and levels of growth and inflation lower than those of the basic scenario; An improvement scenario, which provides for a positive resolution of commercial tensions and higher growth and inflation compared to the basic scenario.
In basic scenarioexperts foresee an inflation on average to 2% in 2025, 1.6% in 2026 and 2% in 2027. The discount revisions compared to the March projections (-0.3 percentage points for 2025 and 2026) mainly reflect the hypotheses of lower energy prices and a strengthening of the euro. Experts are expected that the inflation net of the energy and food component will take to 2.4% on average in 2025 and 1.9% in 2026 and 2027, substantially unchanged since March.
There GDP growth in real terms it is expected 0.9% in 2025, 1.1% in 2026 and 1.3% in 2027. The projection of growth unchanged for 2025 reflects a trend in the first more vigorous quarter than expected, associated with weaker perspectives for the rest of the year.
“Although we expect theuncertainty relating to commercial policies serious on the investments of companies and on exports, especially in the short term – underlines the ECB – the increase of Public investments in defense and infrastructure It will increasingly support growth in the medium term. The increase in real income and a robust labor market they will allow families to spend more. Together with more favorable financing conditions, this should increase the estate capacity of the economy to world shocks “.
ECB Confirm flexibility and data based on data
The Board of Directors reiterates that it is “determined to ensure that inflation stabilizes duly on its 2% medium -term target“And therefore” in the current conditions characterized by exceptional uncertainty, the adequate monetary policy orientation will be defined following a approach led by the dataaccording to which the decisions are adopted from time to time at each meeting “.
The board “is ready to adapt all its tools As part of its mandate to ensure that inflation stabilizes durablely on the goal of 2% in the medium term and to preserve the orderly functioning of the monetary policy transmission mechanism “.
