On Thursday, the European Central Bank cut rates by 25 basis points as expected, lowering the deposit facility rate by 25 basis points to 2.75%, in line with market expectations, marking the fourth consecutive meeting with a rate cut of 2 basis points. The main refinancing rate and marginal lending rate were lowered from 3.15% and 3.40% to 2.90% and 3.15%, respectively.
The European Central Bank noted that inflation continues to align closely with staff forecasts and is expected to return to its 2% medium-term target within this year. The European Central Bank did not make any prior commitments to a specific interest rate path but expressed determination to ensure inflation stabilizes around the 2% medium-term target. The European Central Bank will adopt a data-dependent approach, making decisions at successive meetings.
The bank stated that monetary policy remains tight, and past rate hikes are still being transmitted and having an effect. The economy continues to face challenges.
After the announcement of the European Central Bank's interest rate decision, the euro against the dollar showed little short-term volatility. Traders maintained their bets on a rate cut by the European Central Bank, expecting another 70 basis points of cuts this year. Monetary policy remains tight.
The IMF believes that despite concerns about global trade, inflation in the Eurozone is increasingly under control.
Despite the latest round of surveys showing some signs of recovery, the Eurozone economy remains weak, with inflation hovering above the European Central Bank's 2% target, providing justification for a rate cut on Thursday. "The anti-inflation process is on track," the European Central Bank stated.
The European Central Bank added: "Domestic inflation remains high, mainly because wages and prices in certain sectors are still adjusting to past inflation surges, with the adjustment delayed significantly. However, wage growth is slowing as expected, and profits have somewhat cushioned the impact on inflation."
BCA Research Chief European Strategist Mathieu Savary stated: "We expect there will be two to three more rate cuts. Wage growth will fall back to 2%, unit profits are weakening, and most importantly, U.S. trade policy remains a major drag on European economic activity."
European Central Bank President Lagarde will elaborate on the reasons behind the rate cut at a press conference at 21:45 Beijing time.
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Article forwarded from: Jin Shi Data