European Central Bank cuts policy interest rates by 25 basis points

The European Central Bank (ECB) announced that the bank decided to reduce three policy interest rates by 25 basis points on Thursday, aligning with market anticipations.

The decision, effective Dec. 18, is based on its updated assessment of the inflation outlook, the bank said in a statement.

The interest rates on the deposit facility, the main refinancing operations, and the marginal lending facility will be lowered to 3.00%, 3.15% and 3.40%, respectively.

Noting that the disinflation process is well on track, the bank said headline inflation is projected to average 2.4% this year, 2.1% next year, 1.9% in 2026 and 2.1% in 2027

According to a flash estimate, headline inflation rose to 2.3% in the euro area as of November, up from 2% in October.

“For inflation excluding energy and food, staff projects an average of 2.9% in 2024, 2.3% in 2025, and 1.9% in both 2026 and 2027,” said the bank.

Core inflation, which excludes volatile food, energy, alcohol, and tobacco prices, was stable at 2.7% in November.

Gross domestic product (GDP) in the eurozone rose 0.4% in the third quarter of 2024, accelerating from 0.2% in the second quarter.

On an annual basis, the eurozone economy grew 0.9% in July-September, the largest leap since 2023, and up from 0.6% in April-June.