NEW: FREE Web3 Resume Cheat Sheet DOWNLOAD NOW

ECB Governing Council lowers interest rates by 25 bps

In this post:

  • Three critical ECB interest rates are lowered by 25 basis points on Oct. 17.
  • The Governing Council seeks to achieve the mid-term inflation target of 2%.
  • The PEPP portfolio was reduced by a monthly average of 7B Euros.

Today, the Governing Council lowered the three crucial ECB interest rates by 2 basis points (bps). Beginning Oct. 23, 2024, interest rates on the marginal lending facility, deposit facility, and main refinancing operations will reduce to 3.65%, 3.25%, and 3.4%, respectively. 

According to the ECB’s press release on Oct. 17, inflation was expected to surge in the near future before dipping to the targeted level in 2025. Domestic inflation remained high, and wages rose rapidly. Labor cost pressures were set to continue on a gradual decline, while profits were expected to partially buffer the extent to which they affected inflation. 

The Governing Council to adjust all instruments for inflation reduction  

On Oct. 17, the ECB Governing Council announced it was lowering key interest rates by 0.25 percentage points as inflation continued to be at its lowest in years. The Council claimed that it had taken its latest monetary policy decisions by determining the steps required to achieve the 2% target in a timely manner. 

See also  Russian ruble surges after release of American teacher

The Council explained that it made decisions based on incoming data, which showed that the strategy laid in place to reach projected inflation goals was well on track. It said that it was ready to adjust all instruments within its mandate to preserve smooth monetary policy transmission functioning. 

Lowering deposit facility rates was based on the updated analysis of the inflation outlook, monetary policy transmission strength, and the underlying inflation dynamics. Financial conditions remained restrictive as ‘recent downside surprises in indicators of economic activity’ also impacted the inflation outlook.

The Governing Council disclosed that it would keep policy rates ‘sufficiently restrictive’ for as long as necessary to reach its inflation reduction goal. It emphasized continuing with its meeting-by-meeting and data-dependent approach to determining the restriction’s derivation and appropriate level. 

Nonetheless, the Council was not pre-committing to a specific rate path.

ECB commits to refinancing operations and price stability

According to the press release, the ECB’s Governing Council would adjust its monetary policy framework as it continued to phase out the Pandemic Emergency Purchase Program (PEPP) and the Asset Purchase Program (APP). 

Reinvesting principal payments from maturing securities would no longer occur under the APP, and the PEPP portfolio will be discontinued entirely by the end of the year. The Council, however, planned to maintain flexibility in reinvesting redemptions to curb monetary policy transmission mechanism risks.

See also  Strong dollar threatens big tech and AI growth, casting shadow over S&P 500 rally

The Council disclosed that the Transmission Protection Instrument would remain available to counter unexpected disorderly market dynamics hindering monetary policy transmission across the Eurozone.

Regarding refinancing operations, the Council declared it would continue to regularly assess how targeted lending operations and repayments contributed to its position on monetary policy.   

Christine Lagarde, president of the ECB, was expected to comment on the considerations underlying the Council’s decisions at a press conference on Oct. 17, 14:45 CET.

Cryptopolitan Academy: FREE Web3 Resume Cheat Sheet - Download Now

Share link:

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

Most read

Loading Most Read articles...

Stay on top of crypto news, get daily updates in your inbox

Editor's choice

Loading Editor's Choice articles...
Subscribe to CryptoPolitan