After pressing the temporary brake in July, on Thursday, September 12, the ECB took another step towards lowering interest rates.
As economists predicted, the Governing Council of the ECB reduced the interest rate for using the deposit facility by 25 basis points to 3.5%. It is the interest rate at which the governing board sets its monetary policy.
One of the main factors behind this decision is sluggish economic growth across the euro area and declining inflation.
According to the press release, taking into account the latest assessment of the inflation outlook, the development of core inflation and the strength of the transmission of monetary policy effects, it is now appropriate to take another step in the easing of restrictive monetary policy.
“The latest inflation data was broadly in line with expectations . According to experts, in 2024 general inflation will average 2.5 percent in 2025. – 2.2 percent, and in 2026 – 1.9 percent, as was forecast in June. Inflation is expected to pick up again in the second half of this year, partly because the annual rate of inflation will no longer take into account previous sharp falls in energy prices. In the second half of next year, inflation should decrease to the target level,” the ECB press release states.
The ECB notes that domestic inflation remains high as wages continue to rise rapidly.
“On the other hand, labor cost pressures are easing and profits are partially dampening the inflationary impact of higher wages.” Financing conditions are still tight and economic activity remains sluggish due to low private consumption and investment,” ECB experts state.
Adjusted amounts of other interest rates
Table of Contents
Table of Contents
In March of this year, the ECB set a spread of 15 basis points between the interest rate for the main refinancing operations and the interest rate for using the deposit facility. The difference between the interest rate for using the marginal borrowing facility and the interest rate for the main refinancing operations will not change and will be 25 basis points.
Therefore, if the interest rate for using the deposit option has decreased to 3.50 percent, the interest rate for the main refinancing operations and the interest rate for using the marginal borrowing option will decrease to 3.65 percent, respectively. and 3.90 percent. These changes will come into effect in 2024. September 18
In July, after the ECB meeting, the Chairman of the Board of the Bank of Lithuania, Gediminas Šimkus, said that if there are no surprises, interest rates will be reduced at least twice this year.
The market is waiting for what will happen next
Swedbank investment strategist Vytenis Šimkus says that the most interesting thing is not this decision, which fully met the expectations of the markets, but how the interest rates will change in the future. Financial market participants are currently predicting that base interest rates will decrease by another 0.37 percent by the end of the year. point.
“This means that there is a considerable probability that the base interest rates will be reduced twice more this year,” the expert points out.
According to him, the further decrease of interest rates is also reflected in interbank interest rates, for example, 6 months. The EURIBOR indicator has already decreased to 3.3 percent. On the other hand, many economists predict only one rate cut decision by the end of the year.
“In its communication, the ECB tried not to provide too much information about the future trajectory of interest rates and, as usual, emphasized that the fight against inflation is not over, and further decisions will depend only on the latest economic data,” points out V.Šimkus.
window.fbAsyncInit = function() {
FB.init({
appId: ‘117218911630016’,
version: ‘v2.10’,
status: true,
cookie: false,
xfbml: true
});
};
(function(d, s, id) {
var js, fjs = d.getElementsByTagName(s)[0];
if (d.getElementById(id)) {
return;
}
js = d.createElement(s);
js.id = id;
js.src = “https://connect.facebook.net/lt_LT/sdk.js”;
fjs.parentNode.insertBefore(js, fjs);
}(document, ‘script’, ‘facebook-jssdk’));
#Good #news #loans #ECB #returned #cutting #interest #rates #Business
2024-09-16 20:21:37
– What are the reasons behind the European Central Bank’s decision to lower interest rates?
Here is a comprehensive and SEO-optimized article on the topic of the European Central Bank’s (ECB) decision to lower interest rates:
ECB Lowers Interest Rates: A Step Towards Economic Growth
On September 12, the European Central Bank (ECB) took a significant step towards stimulating economic growth in the euro area by reducing the interest rate for using the deposit facility by 25 basis points to 3.5%. This move was widely anticipated by economists and comes as a response to the sluggish economic growth and declining inflation in the euro area.
Sluggish Economic Growth and Declining Inflation
The ECB’s decision was driven by the recent economic data, which showed a slowdown in economic growth and a decline in inflation. According to the ECB, domestic inflation remains high, driven by rapid wage growth, but labor cost pressures are easing, and profits are partially dampening the inflationary impact of higher wages. Financing conditions are still tight, and economic activity remains sluggish due to low private consumption and investment.
Adjusted Interest Rates
As a result of the decision, the interest rate for the main refinancing operations will decrease to 3.65%, and the interest rate for the marginal borrowing facility will decrease to 3.90%. These changes will come into effect on September 18, 2024.
Future Outlook
The market is now waiting to see what will happen next, with financial market participants predicting that base interest rates will decrease by another 0.37% by the end of the year. According to Vytenis Šimkus, an investment strategist at Swedbank, this means that there is a considerable probability that the base interest rates will be reduced twice more this year.
Expert Insights
Šimkus notes that the ECB’s communication tried not to provide too much information about the future trajectory of interest rates, emphasizing that the fight against inflation is not over, and further decisions will depend only on the latest economic data. He also points out that the further decrease of interest rates is also reflected in interbank interest rates, such as the 6-month EURIBOR indicator, which has already decreased to 3.3%.
Implications for the Economy
The ECB’s decision to lower interest rates is expected to have a positive impact on the economy, making borrowing cheaper and encouraging consumers and businesses to take out loans and invest in the economy. This, in turn, is expected to boost economic growth and inflation in the euro area.
Conclusion
the ECB’s decision to lower interest rates is a significant step towards stimulating economic growth in the euro area. While the market is now waiting to see what will happen next, experts predict that there is a considerable probability that base interest rates will be reduced twice more this year. As the ECB continues to monitor the economic data, its decisions will have a significant impact on the economy and financial markets.
Keywords: ECB, interest rates, economic growth, inflation, euro area, monetary policy.
Meta Description: The European Central Bank (ECB) has lowered interest rates to stimulate economic growth in the euro area. Learn more about the decision and its implications for the economy.
Header Tags:
H1: ECB Lowers Interest Rates: A Step Towards Economic Growth
H2: Sluggish Economic Growth and Declining Inflation
H2: Adjusted Interest Rates
H2: Future Outlook
H2: Expert Insights
H2: Implications for the Economy
* H2: Conclusion
– How will lowering interest rates impact the eurozone economy?
Here is a comprehensive and SEO-optimized article on the topic:
ECB Lowers Interest Rates: What’s Next for the Eurozone Economy?
The European Central Bank (ECB) has taken another step towards easing monetary policy by lowering interest rates. In a move that was widely anticipated by economists, the ECB reduced the interest rate for using the deposit facility by 25 basis points to 3.5%. This decision marks the second time this year that the ECB has lowered interest rates, following a temporary pause in July.
Sluggish Economic Growth and Inflation Concerns
The main factors behind this decision are sluggish economic growth across the euro area and declining inflation. According to the ECB, domestic inflation remains high due to rapidly rising wages, but labor cost pressures are easing, and profits are dampening the inflationary impact of higher wages. Financing conditions are still tight, and economic activity remains sluggish due to low private consumption and investment.
Adjusted Interest Rates
In addition to the interest rate for using the deposit facility, the ECB also adjusted other interest rates. The interest rate for main refinancing operations will decrease to 3.65%, while the interest rate for using the marginal borrowing facility will decrease to 3.90%. These changes will come into effect on September 18, 2024.
What’s Next for the Market?
The market is now waiting to see what will happen next. According to Vytenis Šimkus, an investment strategist at Swedbank, the most interesting thing is not this decision, which fully met the expectations of the markets, but how interest rates will change in the future. Financial market participants are currently predicting that base interest rates will decrease by another 0.37% by the end of the year.
Further Rate Cuts on the Horizon?
This means that there is a considerable probability that base interest rates will be reduced twice more this year. Šimkus points out that the ECB’s decision to lower interest rates was expected, but the market is now focused on what will happen next. If the ECB meets market expectations, it could have significant implications for the eurozone economy.
Reasons Behind the ECB’s Decision
So, what are the reasons behind the European Central Bank’s decision to lower interest rates? The main reasons include:
Sluggish economic growth across the euro area
Declining inflation
High domestic inflation due to rapidly rising wages
Easing labor cost pressures
Tight financing conditions
Sluggish economic activity due to low private consumption and investment
The ECB’s decision to lower interest rates is aimed at stimulating economic growth and inflation in the eurozone. However, the market is now focused on what will happen next, with many expecting further rate cuts before the end of the year.
Keywords: ECB, interest rates, eurozone economy, inflation, economic growth, monetary policy.