According to the ECB, the cut aims to balance controlling inflation close to the 2% target and stimulating economic growth
The (European Central Bank) reduced the basic interest rate from 3.25% to 3% this Thursday (Dec 12, 2024). The cut was 0.25% and the 4th consecutive this year.
With the decision, deposit, refinancing and loan interest rates stood at 3%, 3.15% and 3.4%, respectively. Here is the release (PDF – 147 kB, in English).
Inflation control
In the document, the European Central Bank assesses that the disinflation process “it’s well underway”. It also states that projections indicate that global inflation will fall to 2.4% in 2024, 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027.
“The Governing Council is determined to ensure that inflation stabilizes sustainably at its medium-term target of 2%”these.
Eurozone annual inflation in October. Data for November will be released on December 18th.
The interest rate cut was also decided to stimulate economic growth. According to the ECB, the economic recovery is slower than expected and forecasts for the coming years have been reduced.
“Experts project that the economy will register a growth rate of 0.7% in 2024, 1.1% in 2025, 1.4% in 2026 and 1.3% in 2027”he states.
The European Central Bank also assesses that the reduction in rates “gradually make new loans less expensive for businesses and families”. This should allow people to spend more and companies to invest more, helping to improve the economy.
