Deposit Rate Set at 3%

On December 12, the European Central Bank (ECB) announced a further reduction of its three key interest rates, lowering each by 25 basis points (bps). This decision was outlined in the regulator's official statement.

As a result, the deposit rate now stands at 3%, the main refinancing rate at 3.15%, and the marginal lending rate at 3.4%.

The reduction in the deposit rate is attributed to an updated inflation forecast, changes in core inflation dynamics, and the effective transmission of monetary policy. According to the ECB, the disinflation process is progressing as expected.

The central bank projects headline inflation to average 2.4% in 2024, 2.1% in 2025, 1.9% in 2026, and 2.1% in 2027, coinciding with the introduction of the EU’s expanded emissions trading system. Data on core inflation suggests that it is stabilizing around the ECB's medium-term target of 2% on a sustainable basis, the bank said.

The decision aligns with market expectations and analysts’ forecasts. This marks the fourth rate cut since June, bringing the deposit rate to its lowest level since March 2023, according to the Financial Times.

The ECB has also adjusted its forward guidance. While it previously stated that monetary policy would remain sufficiently restrictive for as long as necessary, it now emphasizes that the effects of restrictive policy will gradually diminish over time.

In November 2024, inflation in the eurozone rose by 2.3% year-on-year, an acceleration from October's 2% annual growth rate.