Table of Contents:
The ECB’s decision to lower interest rates
The European Central Bank (ECB) recently announced a reduction in reference interest rates by 25 basis points, bringing them to 2.75%. This decision, expected by analysts, was motivated by an updated assessment of the inflation outlook and the dynamics of core inflation. The ECB stressed that the disinflationary process is well under way and that inflation should return to stabilizing around the 2% objective in the medium term
.
The reasons behind the rate cut
According to the note released by the ECB, domestic inflation remains high, mainly due to a delayed adjustment of wages and prices in some sectors. However, wage growth is showing signs of moderation, which could contribute to further price stabilization. The recent reductions in interest rates will make loans for families and businesses more accessible, thus encouraging a recovery in demand
over time.
Implications for the European economy
Despite the measures taken, the European economy continues to face significant challenges. Financing conditions remain tight and monetary policy remains restrictive. However, rising real incomes and the gradual easing of monetary policy effects could support growth in demand. The ECB has stated that it will follow a data-driven approach for future rate decisions, without being bound to a
predefined path.
The future of monetary policy
The ECB has also announced that the portfolios of quantitative easing plans are shrinking at a predictable rate. This marks an important step in the process of normalizing the Eurosystem’s financial statements. With the conclusion of targeted long-term refinancing operations, the ECB is preparing to closely monitor the evolution of the economy and inflation to ensure that interest rates remain in line with price stability objectives
.
