The European Central Bank (ECB) Governing Council announced they will lower three ECB interest rates by 25 basis points.
Since September 2023, inflation has decreased by 2.5 percentage points and the inflation outlook has improved. The Governing Council deemed it appropriate to adjust the amount of monetary policy restriction as rates have been steady in the past nine months, according to a press release from the ECB.
The three rates being lowered by the Governing Council are the interest rate on the main refinancing operations, which will be lowered to 4.25%, the interest rate on the marginal lending facility, to be lowered to 4.5%, and the interest rate on the deposit facility, which will be lowered to 3.75%.
The adjusted rates will take effect on June 12, 2024.
These changes are in line with the Governing Council’s goal of ensuring inflation returns to a 2% target rate.
Projects from Eurosystem staff now predict average inflation of 2.5% for 2024, 2.2% in 2025, and 1.9% in 2026. Inflation rates excluding energy and food are predicted to be an average of 2.8% in 2024, 2.2% in 2025 and 2.0% in 2026.
The Governing Council has confirmed a reduction of Eurosystem’s securities held under the pandemic emergency purchase programme (PEPP). The reduction rate will be an average of €7.5 billion per month over the months of July through December 2024.
