The Governing Council of the ECB decided today to reduce the interest rate on deposits at the central bank by 25 basis points. The interest rate on deposits at the central bank will therefore be reduced to 3.50%, while the interest rates on the main refinancing operations and the marginal refinancing operations will be reduced to 3.65% and 3.90% respectively. The changes will come into effect on 18 September. Inflation expectations were also confirmed, with the latest projections by ECB staff placing headline inflation “on average at 2.5% in 2024, 2.2% in 2025 and 1.9% in 2026, as in the June projections”, the ECB note reads. . Compared to core inflation, however, the projections for 2024 and 2025 have been revised “slightly upwards, as increases in services prices were higher than expected”. At the same time, ECB staff continue to expect a rapid decline in core inflation, from 2.9% this year to 2.3% in 2025 and 2.0% in 2026.”
Domestic inflation remains high “as wages continue to grow at a sustained pace”, but “pressures on labour costs are easing and profits are partially cushioning the impact on inflation from rising wages”. Financing conditions remain tight and economic activity remains limited, reflecting weak private consumption and investment.” And regarding growth, “ECB staff projections point to an economic growth rate of 0.8% in 2024, 1.3% in 2025 and 1.5% in 2026, with a slight downward revision compared to the June projections, mainly due to the lower contribution of domestic demand in the coming quarters.”
And here is Antonio Tajani’s reaction in the Senate: “I am quite optimistic about the economic situation. An important match is being played in Frankfurt. I expected a more courageous choice from the ECB in terms of rate cuts. 0.25% is too little. We need to focus on growth, inflation is falling. The Central Bank must be able to do more and I believe that the treaty that established the ECB must be modified, which cannot only be the guardian of inflation, but must govern the currency to support growth and the real economy,” Tajani insisted. “The cost of borrowing is excessive and there is no reason to cut it by just 0.25%. We must not exceed the rigorist whims that harm everyone’s economy, even Germany, which needs more industry,” he finally said.
Source: IL Tempo
Emma Fitzgerald is an accomplished political journalist and author at The Nation View. With a background in political science and international relations, she has a deep understanding of the political landscape and the forces that shape it.
