Reduce the three basics interest rates her ECB The Board of Directors decided by 25 basis points today.
In particular, the decision of the ECB’s Board of Directors to reduce the interest rate on the acceptance of deposits – the interest rate by which the Board of Directors gives the direction of monetary policy – is based on its updated evaluation of inflation prospects, the potential of underlying inflation and intensity.
Inflation is currently shaping around the medium -term target of the 2% set by the Board of Directors. According to the basic scenario of the new views of the Eurosystem experts, general inflation is estimated to be on average at 2.0% in 2025, 1.6% in 2026 and 2.0% in 2027.
The down revisions compared to March’s projections, by 0.3 percentage points for 2025 and 2026, mainly reflect cases for lower energy prices and stronger euro. Experts expect that inflation without energy and food prices will be on average of 2.4% in 2025 and 1.9% in 2026 and 2027, that is, it will remain in general unchanged since March.
Experts expect that the rate of real GDP growth will be on average at 0.9% in 2025, 1.1% in 2026 and 1.3% in 2027. Non -revision of the growth rate in 2025 reflects a stronger than expected first quarter in combination with the wealthy prospects.
While the uncertainty surrounding commercial policies is expected to negatively affect business investment and exports, in particular in the short -term horizon, the rise of public investment in defense and infrastructure will increasingly support growth in the medium term.
The rise of real incomes and the strong labor market will allow households to spend more. Along with the most favorable funding conditions, this should enhance the resilience of the economy in global disorders.
In the context of high uncertainty, experts also evaluated some of the mechanisms through which different commercial policies could affect growth and inflation under some alternative scenarios. These scenarios will be published along with the experts’ screenings on the ECB website.
As part of this scenario analysis, a further escalation of commercial tensions in the coming months would result in the rate of growth and inflation to be levels lower than the basic scenario.
On the contrary, if commercial tensions are diverged with favorable outcome, the growth rate and, to a lesser extent, inflation will be higher than the basic scenario.
Most of the underlying inflation indicates that inflation will stabilize around the medium -term goal of the Board of Directors for 2% on a sustainable basis. The rate of wage rise remains increased, but it is still significantly mitigated and profits partly absorb its impact on inflation.
Concerns that increased uncertainty and volatile market reactions to commercial tensions in April would have a restrictive effect on funding have weakened.
The Board of Directors is determined to ensure that inflation will be stabilized in a medium -term goal of 2%. In particular, under the current conditions of exceptional uncertainty, there will be an approach based on the available data and will take decisions from a meeting at a meeting to determine the appropriate direction of monetary policy.
The decisions of the Board of Directors on interest rates will be based on the evaluation of the prospects for inflation in the light of incoming economic and financial data, the dynamics of underlying inflation and the intensity with which monetary policy is transmitted. The Board of Directors is not committed in advance for a specific course of interest rates.