Market Updates
ECB Lowered Rates by 0.25% and Signaled Restrictive Stand
Bridgette Randall
06 Jun, 2024
Frankfurt
The European Central Bank lowered its three key lending rates by 25 basis points from record highs.
The move was widely advertised by the central bank, but policymakers stressed that price pressures are still high and rates are likely to remain elevated for the foreseeable future and well into next year.
The ECB's Governing Council lowered the main refinancing rate to 4.25%, the deposit facility rate to 3.75%, and the marginal lending rate to 4.5%.
"Based on an updated assessment of the inflation outlook, the dynamics of underlying inflation, and the strength of monetary policy transmission, it is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady," the ECB Governing Council said in a statement released after the policy meeting held Thursday.
The central bank lowered all three rates for the first time since the last cut in March 2016.
The central bank lowered the rate after inflation eased by 2.5 percentage points since September 2023, driven in large part by the decline in energy prices.
The policy committee's staff revised the overall and core inflation estimates for 2024 and 2025.
The staff projected the overall inflation in 2024 as averaging 2.5% and 2.4% in 2025, and the core inflation as 2.8% and 2.2%, respectively.
The economic growth estimate was revised higher to 0.9% in 2024 and 1.4% in 2025.
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