The European Central Bank (ECB) announced its second rate cut of the year by lowering its deposit facility rate by 25 basis points to 3.50%.
The ECB’s interest rates on the main refinancing operations and the marginal lending facility were also decreased to 3.65% and 3.90% respectively. The changes will take effect on Sept. 18.
“Based on the Governing Council’s updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to take another step in moderating the degree of monetary policy restriction,” said the ECB in a press announcement. While acknowledging “domestic inflation remains high as wages are still rising at an elevated pace,” the ECB observed that “labor cost pressures are moderating, and profits are partially buffering the impact of higher wages on inflation.”
The ECB is predicting the core inflation within its member states will decrease from 2.9% this year to 2.3% in 2025 and 2.0% in 2026.
The ECB has announced its first interest rate cut in nearly five years in June while opting to hold rates the following month. Other central banks in major Western economies have already cut rates, leaving the Federal Reserve as the exception by declining to follow suit. The US central bank will hold its next rate policy meeting from Sept. 17-18 and is widely expected to cut rates.
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