The administrative Council of the European Central Bank (ECB) decided at yesterday’s monetary policy meeting, another in 2025. year, to reduce three key interest rates for 25 base points.
The decision to reduce interest on the cash deposit, ie the rates that advice to the Monetary Policy, is based on the new evaluation of inflationary appearance, base inflation dynamics and monetary policy transmission.
The ECB statement states that disinflation is well advanced and that inflation continued to move mainly in accordance with the projections of Eurosystem experts.
“The latest ECB expert projections are mainly confirmed by the prior evaluation of inflationary appearance. Namely, they now anticipate that total inflation will average 2.3 percent in 2025. year, 1.9 percent in 2026. and two percent in 2027. total inflation has been revised in 2025. due to stronger energy price dynamics. Inflation without energy and food, experts predict the average rate of 2.2 percent in 2025, two percent in 2026. and 1.9 percent in 2027 “, point out from the Central Bank.
Most of the measures of base inflation points to the conclusion that inflation will stabilize, even stable, at the levels around the medium-term goal of the administrative advice of two percent. Domestic inflation is still high, in the first place because salaries and prices in certain sectors are still adapted to past great increase in inflation with a significant time.
However, salary growth decreases in accordance with expectations and profits partially neutralizes its influence on inflation, banker me.
The restrictiveness of the monetary policy is noticeably decreasing: due to the reduction of interest rates, the borrowing for companies and households is challenged and the loan growth increases. At the same time, the mitigation of funding conditions difficult because the increase in interest rates continue to be transferred to existing loans, and lending is, in general, still weak.
“The economy is facing continuous challenges, so the growth projections are re-revised: to 0.9 percent for 2027. and 2026. Establishes and continuous incurrence of great uncertainty related to trade policies and economic policies in general. The growth of real income and gradual weakening of the impact of interest rates will be expected to give the main contribution to the increase in demand, which is expected to be in time, “the ECB statement said.
It also points out that the Administrative Council is determined to ensure that inflation is stabilized, and stabilized, in a medium-term target level of two percent. When determining the appropriate position of monetary policy, especially in current conditions, increasing uncertainties, an approach is based on the data will be applied at each meeting.
Decisions of the Administrative Council on interest rates will depend on the previous period, from its evaluation of inflationary appearance based on new economic and financial data, dynamics of base inflation and monetary policy transmission. Administrative advice does not opt for a predetermined dynamics of change rate.
