6 June: Eurozone Headline Rate Falls From 4.5% To 4.25%
The European Central Bank (ECB) announced today that it is cutting borrowing rates for the eurozone by 0.25 percentage points, marking the first decrease since 2019, writes Bethany Garner.
Following today’s announcement, which was widely expected across the financial community, the central bank’s main refinancing rate is 4.25%, down from its all-time high of 4.50%.
The ECB’s marginal lending facility has dropped to 4.50%, while its deposit rate now sits at 3.75%.
Explaining its decision to cut rates, the ECB said: “Based on an updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates stteady.
“Since the Governing Council met in September 2023, inflation has fallen by more than 2.5 percentage points and the inflation outlook has improved markedly.”
The ECB has not committed to further cuts in the near future, however. It added: “Interest rate decisions will be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission. The Governing Council is not pre-committing to a particular rate path.”
Today’s cut comes despite the recent uptick in eurozone inflation,…
