On Thursday, the European Central Bank lowered the deposit facility rate by 25 basis points to 3.00% in its last policy meeting of 2024, in line with market expectations; this is the fourth rate cut of the year, totaling a 100 basis point reduction, bringing the benchmark rate to its lowest level since March 2023. The bank also plans to stop reinvesting in the Pandemic Emergency Purchase Programme (PEPP) by the end of 2024.

After the European Central Bank announced its interest rate decision, the euro rose 15 points against the dollar in the short term, and then fell again.

The European Central Bank removed the phrase about maintaining rates at 'sufficiently restrictive' in its statement, suggesting the possibility of further rate cuts, and warned that economic growth will be weaker than its previous forecasts. The bank expects GDP growth rates of 0.7% in 2024, 1.1% in 2025, 1.4% in 2026, and 1.3% in 2027. (September expectations were 0.8%, 1.3%, and 1.5%, respectively).

Meanwhile, the European Central Bank believes that the anti-inflation process is progressing smoothly. The bank expects the inflation rate to be 2.4% in 2024, 2.1% in 2025, and 1.9% in 2026. (September expectations were 2.5%, 2.2%, and 1.9%, respectively); it expects the core inflation rate to be 2.9% in 2024, 2.3% in 2025, and 1.9% in 2026. (September expectations were 2.8%, 2.3%, and 2.0%, respectively);

In terms of policy guidance, the European Central Bank did not make prior commitments to a specific interest rate path and stated that it will follow a data-dependent and meeting-by-meeting approach to determine the appropriate monetary policy stance.

Traders' expectations for the European Central Bank's interest rates remained stable after the announcement, anticipating a 127 basis point cut in 2025.

Foreign exchange strategist Vassilis commented on the European Central Bank's decision, stating that the euro fell to a new low because the European Central Bank abandoned the 'restrictive policy' part of its statement, but this does not mean that the policy language is entirely dovish. Bond movements in the eurozone were moderate.

Continuously updating...

Article reposted from: Jinshi Data