The European Central Bank’s governing council Thursday cut three key interest rates by 25 basis points, based on easing inflation. The rate cut, effective October 23, brings deposit interest down to 3.25%, refinance rates to 3.40% and the lending rate fell to 3.65%. File photo by Ronald Wittek/ EPA-EFE
The European Central Bank’s governing council Thursday cut three key interest rates by 25 basis points, based on inflation falling.
“The incoming information on inflation shows that the disinflationary process is well on track,” the ECB said in a statement. “The inflation outlook is also affected by recent downside surprises in indicators of economic activity.” Advertisement
The rate cut, effective Oct. 23, brings deposit interest down to 3.25%, refinance rates dropped to 3.40% and the lending rate fell to 3.65%.
The ECB governing council said it’s determined to return inflation to a 2% medium-term target in a timely manner.
“Inflation is expected to rise in the coming months, before declining to target in the course of next year,” ECB’s Thursday statement said. “Domestic inflation remains high, as wages are still rising at an elevated pace. At the same time, labor cost pressures are set to continue easing gradually, with profits partially buffering their impact on inflation.”
The ECB said Thursday the bank’s securities asset purchase program portfolio is declining.
The pandemic emergency purchase program portfolio is also declining by $8.12 billion per month on average. The ECB said it intends to “discontinue reinvestments under the PEPP at the end of 2024.” Advertisement
The ECB also cut interest rates by a quarter point or 25 basis points in September, driven by falling inflation.
The bank said then that it expected economic recovery from inflation to strengthen over time, and also noted that economic activity was still subdued by weak private consumption and investment.
