On Thursday 6 March the Governing Council of the European Central Bank (ECB) held its regular meeting.
It decided to cut all three key interest rates by 25 basis points for the sixth time in a row.
The deposit rate will now be 2.5%, the main refinancing rate 2.65% and the marginal lending rate 2.9%. The decision will come into force on 12 March. It is worth noting that the 25bp cut was predicted by all but one analyst surveyed by Bloomberg the day before.
The ECB said in a statement that the disinflation process is on track. The regulator updated its inflation forecasts for this year and next: the ECB expects inflation to be 2.3% in 2025, 1.9% in 2026 and 2% in 2027, with a medium-term target of 2%.
The upward revision of headline inflation for 2025 reflects stronger energy price dynamics. The disinflation process is on track. Most measures of core inflation suggest that inflation is stabilising at the Governing Council's medium-term objective of 2% on a sustainable basis. Price increases for goods and services, mainly for domestic consumption, remain elevated, mainly because wages and prices in certain sectors are adjusting to the past increase in inflation with a significant lag. However, wage growth is decelerating as expected and profits are partly cushioning the impact of higher prices," the ECB said.
At the same time, the ECB lowered its growth forecasts for the eurozone economy, which it now expects to grow by 0.9% in 2025, 1.2% in 2026 and 1.3% in 2027.
The downward revision of expectations for 2025 and 2026 is due to lower exports and continued weakness in investment amid high trade policy uncertainty, according to the ECB statement. Against the backdrop of the ECB's decision, the euro rose to a four-month high, gaining 0.5% to $1.0844, writes Bloomberg.
Meanwhile, economists are not ruling out a pause in the ECB's monetary easing cycle amid growing uncertainty about the outlook for the EU economy and external factors, especially geopolitical ones.