ECB followed expectations by lowering the deposit rate by 25 bps to 3.75%. The main refinancing rate was adjusted to 3.65%, as the spread between the two rates is now set at 15 bps. Moving forward, the ECB emphasized its commitment to a “data-dependent” and “meeting-by-meeting” approach, avoiding any pre-commitment to a specific rate path.
In its accompanying statement, ECB highlighted that recent inflation data had been largely in line with projections. Inflation is expected to rise again towards the end of the year, primarily due to the base effect from last year’s sharp energy price falls. The central bank anticipates inflation will decline closer to its target in the second half of 2025.
Updated inflation forecasts show headline inflation averaging 2.5% in 2024, 2.2% in 2025, and hitting 1.9% by 2026. Core inflation is projected to fall from 2.9% in 2024 to 2.3% in 2025, and eventually reach 2.0% in 2026.
On the growth front, there was a slight downward adjustment in the outlook. The Eurozone economy is now expected to expand by 0.8% in 2024, with growth improving to 1.3% in 2025 and 1.5% in 2026.
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