ECB Holds Steady on Interest Rates, Signals Potential for Future Cuts
Frankfurt – The European Central Bank (ECB) today announced it will maintain its current monetary policy interest rates, leaving the deposit facility rate at 2%, the main refinancing operations rate at 2.15%, and the marginal lending facility rate at 2.40%. The decision was unanimous, the ECB confirmed.
The move comes as the ECB slightly revised its inflation outlook, now stating inflation is “around” its medium-term target of 2%. This contrasts with previous communications, and follows a marginal increase in inflation to 2.1% in August, up from 2% in both July and June.The ECB projects average inflation of 2.1% for 2024, 1.7% in 2026, and 1.9% in 2027 – slightly down from June’s forecasts of 2%, 1.6%, and 2% respectively. Core inflation is expected to average 2.4% this year (unchanged from June), 1.9% in 2026 (unchanged), and 1.8% in 2027 (previously 1.9%).
While these figures could perhaps open the door for future rate reductions, ECB President Christine Lagarde emphasized that any adjustments will be data-dependent. She reiterated that the exchange rate of the euro is not a target of monetary policy and is not directly controlled by the central bank. “We continue to be in a good situation,” Lagarde stated during a press conference, adding that future decisions will be based on incoming economic data.
The ECB also updated its economic growth forecasts, projecting 1.2% growth for 2024, an increase from the 0.9% forecast in June. However, growth for 2025 was revised down to 1% from 1.1% previously, while the 2027 forecast remains at 1.3%. These revisions reflect the recent agreement on tariffs with the United States and a reduction in overall economic uncertainty, averting a previously considered “severe” scenario.
lagarde attributed the slowdown experienced in the second quarter to an “initial” impact from the evolving global trade landscape. She expressed confidence that economic activity will be supported by low unemployment and ongoing investments in infrastructure and defense. Moreover, the ECB anticipates that headwinds, such as a stronger euro, “should vanish next year.”
