All according to the expectations: the Board of Directors of the European Central Bank (ECB) He decided to reduce the three reference interest rates by 25 basis. In particular, the decision to reduce the rate on deposits stems from the updated assessment of the prospects of inflation, the dynamics of the basic inflation and the intensity of the transmission of monetary policy, reads the Central Bank’s Statement.
Reference rates
The Board of Directors has today decided to reduce the three Rates of reference of the ECB by 25 basis points. Therefore, the interest rates on deposits at the Central Bank, the main refinancing operations and on the marginal refinancing operations will be reduced respectively to 2.75%al 2.90% and al 3.15%with effect from February 5, 2025.
The evolution of inflation
Frankfurt explains that “the disappointment process is well started”, with the inflation that “has continued to evolve substantially in line with the projections of our experts and should return to the goal of the Board of Directors of 2% in the medium term during the course of the year”.
The basic inflation measures suggest “mostly that will be permanently around the objective”, with the internal inflation that “remains high, mainly because wages and prices in certain sectors are still adapting to the past increase in inflation with considerable delay”. However, the growth of wages “is moderating according to expectations and profits are partially attenuating the impact on inflation”, it is underlined. Christine Lagarde warns: “Premature to say until where the rates will go down”.
Monetary policy still restrictive
The ECB states that “the recent reductions in interest rates decided by the Board of Directors gradually make The new loans to businesses and families are less expensive. At the same time, the financing conditions continue to be rigid, also because monetary policy remains restrictive and the past raises of interest rates are still transmitting to the existing credits; Some expiring loans are therefore renewed at higher rates. The economy is still facing adverse circumstances, but the increase in real income and the gradual to fail the effects of restrictive monetary policy should support one Growth of demand over time “.
The next choices
The Board of Directors is determined to ensure that inflation stabilizes durablely on its goal of 2% In the medium -term and will follow an approach guided by the data on the basis of which the decisions are adopted from time to time at each meeting. In particular, the decisions of the Board of Directors on interest rates will be based on its evaluation of the inflation prospects, considering the new economic and financial data, the dynamics of the underlying inflation and the intensity of the transmission of monetary policy, without binding to A particular route of the rates.
The purchase programs of activity
The PAA and PEPP wallets (Pandemic Emergency Purchase Program) are being reduced to a measured and predictable rhythm, given that theEurosystem no longer reinve its capital refunded on the expiring qualifications. On 18 December, with the reimbursement of the remaining amounts received by banks in the context of targeted longer -term refinancing operations, this part of the balanced’s normalization process ended.
