The European Central Bank (ECB) reduced them interest rates for the fourth time this year, by 0.25%, at the meeting on Thursday (12.12.2024).
The ECB announced that the decision on the new rate cut is based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission.
“The deflation process is on track,” the announcement emphasizes.
Officials forecast inflation to be 2.4% in 2024, 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027. Structural or “core” inflation where no calculating the volatile prices for energy and food, it will reach 2.9% in 2024; 2.3% in 2025 and 1.9% in both 2026 and 2027.
When the ECB decided on its third rate cut for October, the economic situation looked so grim that officials were debating whether to follow through with a 50 basis point move to avoid falling behind the curve.
That debate finally ended as GDP was stronger than expected in the third quarter. Only a handful of policymakers called for a big cut to remain on the table in December.