European Central Bank reduces interest rates by 0.25%

The European Central Bank has announced today its fourth interest cut rate of 2024, on this occasion by 0.25% lowering the key rate to 3%.

On this meeting the ECB reiterated the intention of keeping policy rates sufficiently restrictive for as long as necessary although admitted that the reduction of inflation was well on track.

On their quarterly staff macroeconomics projection the inflation forecast for the 2024 was lowered by 10 basis points from the previous 2.5% to the 2.4%. Their projection for 2025 were also revised and lowered to 2.1% from previous 2.2% projection.

In terms of growth they are projecting the eurozone economy to grow 0.7% in 2024, down from the previous forecast of 0.8%. For 2025, expect growth has come down to 1.1% from the previous projection of 1.3%.

Cooling inflation and deterioration in the growth prospect of the eurozone specially in Germany and France economy are signalling further cuts on their next meeting.

Although some bets were on a bigger interest cut of 0.50%, ECB probably wanted to wait until president elected Donald Trump is in charge of USA in January when a better economic risk can be assessed with the trade barriers proposals.