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December 12, 2024EUROPEAN CENTRAL BANK MONETARY POLICY The European Central Bank (ECB) announced today that it would reduce the three key ECB interest rates by 25 basis points. The interest rates on the main refinancing operations, the marginal lending facility and the deposit facility will be at 3.15%, 3.40% and 3.00% respectively effective December 18th.
The disinflation process appears to be well on track, with ECB staff expecting headline inflation to average just above 2.0% in the 2024-2027 period, with inflation excluding energy and food expected to decline to 2.3% in 2025 and 1.9% in 2026 and 2027.
ECB staff now expect a slower economic recovery than in their September projections, with 0.7% growth expected in 2024 and 1.1% in 2025. This recovery will be mainly dependent on rising real incomes, allowing for increased consumption. Easing of restrictive monetary policy should also support a pick-up in domestic demand.
The asset purchase programme (APP) portfolio is declining at a measured and predictable pace, as the Eurosystem does not reinvest all principal payments from maturing securities. The Governing Council intends to reduce the Pandemic Emergency Purchase Programme (PEPP) portfolio by €7.5 billion per month on average and to discontinue reinvestments under the PEPP at the end of 2024.
The Governing Council notes it is determined to see inflation sustainably stabilise at its 2.0% medium-term target. It will follow a meeting-by-meeting approach in determining the appropriate monetary policy stance, and in particular interest rate decisions will be based on assessments of the inflation outlook, in light of incoming economic and financial data. The next scheduled monetary policy meeting will be on January 30, 2025.
Source: European Central Bank: Monetary Policy Decisions