Sep 13th 2024 Further reduction in key rates

The European Central Bank (ECB) is reacting to the slowdown in inflation in the euro area and is again lowering the key interest rate following the monetary policy turnaround in June. The deposit rate, which sets the trend on the financial market, was cut by 0.25 percentage points to 3.5 per cent. This was announced by the ECB on Thursday in Frankfurt am Main.

The ECB's main refinancing rate and the marginal lending facility rate were each cut by 0.6 percentage points to 3.65 per cent. This larger cut in the deposit rate results from changes that were already decided in the spring. The aim is to narrow the gap between the deposit and main refinancing rates in order to encourage participation in weekly credit transactions and to reduce market interest rate volatility.

Loans for private and corporate customers will tend to become cheaper, while savings deposits such as call money or fixed-term deposits will yield less. The financial world has largely welcomed the interest rate cut, although some bank representatives and economists have warned against further easing too quickly. The European stock markets reacted positively to the decision.

In August, the inflation rate fell to 2.2 per cent, the lowest level in three years. Compared to the record levels of almost 11 per cent in October 2022, there has been a noticeable easing. The ECB expects economic growth of just 0.8 per cent in 2024 and has revised downwards its forecasts for the following years, mainly due to weaker domestic demand.

How monetary policy will continue will depend on future economic data. Another interest rate cut is possible, but has not yet been decided. In the US, a rate decision is expected on 18 September, with the key monetary policy rate currently at 5.25 to 5.50 per cent.

Quelle: https://orf.at/stories/3369367/