European Central Bank cuts key interest rates for 4th time in 2024

The central bank for the 20 eurozone countries reduced the rate it pays on bank deposits to 3 per cent from 3.25 per cent. The rates at which it lends to banks for one week and one day were cut to 3.15 per cent and 3.4 per cent respectively.

The new rates will be effective from December 18.

"Financing conditions are easing, as the [ECB} governing council’s recent interest rate cuts gradually make new borrowing less expensive for firms and households," the ECB said in a release.

"But they continue to be tight because monetary policy remains restrictive and past interest rate hikes are still transmitting to the outstanding stock of credit," it noted.

The central bank would stop buying bonds under its Pandemic Emergency Purchase Programme this month, it said.

Domestic inflation has edged down, but remains high, mostly because wages and prices in certain sectors are still adjusting to the past inflation surge with a substantial delay, the ECB release said.

It foresees headline inflation in the eurozone averaging 2.4 per cent in 2024, 2.1 per cent in 2025, 1.9 per cent in 2026 and 2.1 per cent in 2027 when the expanded EU Emissions Trading System becomes operational.

For inflation excluding energy and food, it projects an average of 2.9 per cent in 2024, 2.3 per cent in 2025 and 1.9 per cent in both 2026 and 2027.

Most measures of underlying inflation suggest that inflation will settle at around the governing council’s 2-per cent medium-term target on a sustained basis.

Financing conditions are easing, but continue to be tight as monetary policy remains restrictive and past interest rate hikes are still transmitting to the outstanding stock of credit.

The central bank now expects a slower economic recovery than in the September projections. Although growth picked up in the third quarter (Q3) this year, survey indicators suggest it has slowed in Q4.

Fibre2Fashion News Desk (DS)