On June 6th, the European Central Bank (ECB) announced a decision to reduce its benchmark interest rates by 0.25%. This marks the first cut in reference rates in 8 years, with the last reduction occurring in March 2016 when rates were lowered to 0%. The ECB also announced that the interest rates on main refinancing operations, marginal refinancing operations, and deposits at the central bank would rise to 4.25% and 4.50% respectively, and 3.75%.
The rate on deposits also saw its first reduction in cost of money since 2019 when the ECB decided to raise it amidst a price surge. According to ECB experts, economic growth is expected to increase to 0.9% in 2024, 1.4% in 2025, and 1.6% in 2026. Inflation is estimated to average around 2.5% overall in these years, with inflation net of energy and food component expected to average around 2.8% from now until then.
During a press conference following the decision on rates, ECB President Christine Lagarde emphasized a data-dependent approach, stating that rates will be decided meeting by meeting based on an assessment of inflation outlook, underlying inflation dynamics, and monetary policy transmission. Following this decision, there have been significant changes in both financial and cultural landscapes with restructuring negotiations at Barry Callebaut frozen until September and new developments at the National Cinematheque.
This reduction has already resulted in substantial savings for consumers on loans for both housing and consumer goods as mortgage rates have dropped down to an average of 3.69%, while consumer credit rates have fallen down to an average of
