The European Central Bank (ECB) has implemented its fourth interest rate cut of 2024, reducing the deposit rate by 25 basis points to 3%. This rate, which affects overnight deposits from banks, serves as the ECB’s primary tool for steering its monetary policy.
This move was widely expected by the market, with further rate cuts anticipated in 2025. Alongside the deposit rate cut, the ECB lowered its other key interest rates as well. The new rates are set at 3.15% for main refinancing operations, which provide funds to banks on a weekly basis, and 3.4% for the marginal lending facility, which offers overnight credit to banks against broad collateral.
The ECB’s rate cuts began in June 2024, aimed at stimulating the Eurozone’s sluggish economy by encouraging borrowing, spending, and investment. As inflation approaches the ECB’s target of 2%, attention is turning to the Eurozone’s ongoing weak growth, with projections showing a modest increase of 0.8% in 2024 and 1.3% in 2025.
After this widely anticipated cut, all eyes are now on ECB President Christine Lagarde’s press conference, scheduled for Thursday afternoon. New risks have emerged since the ECB’s last meeting in October, including political instability in the Eurozone’s largest economies and developments following the US election. Investors are closely monitoring signs of when the ECB might halt the rate cuts and what economic and inflation projections will influence its 2025 monetary policy decisions.
