FRANKFURT, Sept 12 (Askume) – The European Central Bank cut interest rates on Thursday, saying low inflation and economic growth had pushed rates back down.
The second rate cut in three months reflects a gradual normalization of policy by the European Central Bank, which was forced to raise borrowing costs to record highs last year because of the worst inflation in a generation.
“Based on the Governing Council’s latest assessment of the inflation outlook, underlying inflation dynamics and the strength of monetary policy transmission, it is now appropriate to take further steps to reduce the degree of monetary policy restraint,” the ECB said.
The eurozone central bank did not clarify whether it would cut interest rates further in October, saying “domestic inflation remains elevated.”
But it added that “labour cost pressures are easing and profits are partially offsetting the inflationary impact of rising wages.”
Thursday’s cut brought the ECB’s bank deposit rate down to 3.50% from 3.75%, a level that most economists still believe limits or slows economic activity.
Money markets are assessing several more cuts of similar magnitude, with deposit rates remaining at 2.0% or 2.25% until June 2025.
The interest rate at which banks borrow money from the European Central Bank in the weekly auction has been raised to 3.65% from 4.25%, following a move earlier this year to reduce penalties for lenders using the facility .
Daily cash auction rate reduced from 4.50% to 3.90%.
ECB President Christine Lagarde will answer questions about the future direction of interest rates at a press conference at 1245 GMT.
