In a press release, the ECB announced that it has decided to reduce the deposit facility rate by 25 basis points to 3.5 percent due to the decline in inflation. The decision follows the bank's rate cut in June, its first cut in five years.
The market expects the move to further ease financing conditions for households and businesses in the euro zone.
"Based on the Governing Council's updated assessment of the inflation outlook, underlying inflation dynamics and the strength of monetary policy transmission, it is now appropriate to take a further step to reduce the degree of monetary policy restriction," the bank said.
Following the cut in the deposit facility rate, the rates for the main refinancing operations and the marginal lending facility will be reduced to 3.65 percent and 3.90 percent, respectively, in accordance with the spread established by the ECB between the three key interest rates.
The latest staff estimates released by the central bank kept inflation forecasts unchanged from its June projections. ECB staff estimate that inflation will average 2.5 percent in 2024, 2.2 percent in 2025 and 1.9 percent in 2026.
Core inflation projections for both 2024 and 2025 have been revised upward.
Eurozone economic growth projections have been revised downwards from June. ECB staff forecast the economy will grow by 0.8 percent in 2024, 1.3 percent in 2025 and 1.5 percent in 2026.
The ECB reiterated its commitment to reduce inflation in the euro zone in a timely manner, saying it "will keep policy rates sufficiently restrictive as long as necessary to achieve this goal."
This is the second time the ECB has cut key interest rates since June, when rates were reduced by 25 basis points.
The market expects the move to further ease financing conditions for households and businesses in the euro zone.
"Based on the Governing Council's updated assessment of the inflation outlook, underlying inflation dynamics and the strength of monetary policy transmission, it is now appropriate to take a further step to reduce the degree of monetary policy restriction," the bank said.
Following the cut in the deposit facility rate, the rates for the main refinancing operations and the marginal lending facility will be reduced to 3.65 percent and 3.90 percent, respectively, in accordance with the spread established by the ECB between the three key interest rates.
The latest staff estimates released by the central bank kept inflation forecasts unchanged from its June projections. ECB staff estimate that inflation will average 2.5 percent in 2024, 2.2 percent in 2025 and 1.9 percent in 2026.
Core inflation projections for both 2024 and 2025 have been revised upward.
Eurozone economic growth projections have been revised downwards from June. ECB staff forecast the economy will grow by 0.8 percent in 2024, 1.3 percent in 2025 and 1.5 percent in 2026.
The ECB reiterated its commitment to reduce inflation in the euro zone in a timely manner, saying it "will keep policy rates sufficiently restrictive as long as necessary to achieve this goal."
This is the second time the ECB has cut key interest rates since June, when rates were reduced by 25 basis points.
