New ECB Rate Cut

The European Central Bank (ECB) meeting in Ljubljana, Slovenia decided on a new, third interest rate cut of 25 basis points in a year.

The ECB’s benchmark interest rates will therefore be 3.25%, 3.40%, and 3.65%, taking into account central bank deposits, core refinancing operations, and marginal refinancing operations.

“In particular, the decision to lower the central bank deposit rate, the rate through which the Governing Council guides monetary policy, follows from an updated assessment of the inflation outlook, the evolution of core inflation, and the intensity of monetary policy transmission,” the ECB wrote in a note. “The latest inflation information indicates that the disinflationary process is well underway. The inflation outlook is also affected by recent downside surprises in measures of economic activity.”

The ECB also emphasizes that the objective is to bring inflation back to 2% in the medium term, so monetary policy will be quite restrictive to achieve this goal. Hence the mantra that the institution led by Christine Lagarde repeats every time: The bank “will continue to follow a data-driven approach whereby decisions are made time after time at each meeting.”