11 April: Hopes Rise For Summer Cut To Borrowing Costs
The European Central Bank (ECB) has, as widely expected, left borrowing costs untouched across the Eurozone, while potentially paving the way for interest rate cuts later this summer, Andrew Michael writes.
Today’s announcement means the central bank’s main refinancing rate remains at a record high of 4.5%, where it has stood since last October. The ECB’s marginal lending facility stays at 4.75%, while the deposit rate continues at a level of 4%.
Explaining its decision, the ECB said: “Most measures of underlying inflation are easing, wage growth is gradually moderating, and firms are absorbing part of the rise in labour costs in their profits”.
It added, however, that “domestic price pressures are strong and are keeping services’ price inflation high”.
Market watchers responded by suggesting that the tone of today’s statement could potentially result in an easing of borrowing costs across the Eurozone this summer.
Consumer prices in the 20 countries that share the euro rose by 2.4% in the year to March 2024. After a prolonged bout of interest rate rises by the ECB last year, Eurozone inflation now looks likelier to reach its long-term target of 2% more quickly than in the US, where buoyant economic data has kept inflation levels stubbornly elevated above 3% for months.
By way of contrast, annual UK inflation stood at 3.4% in the year to March 2024, with the next official figures…
