ECB, Consecutive Interest Rate Cuts... Deposit Rate 3.50% → 3.25%

The European Central Bank (ECB), the integrated central bank of the 20 Eurozone countries, cut its policy interest rate for the second consecutive time following last month.

Christine Lagarde, President of the European Central Bank (ECB). [Image source=Yonhap News]

On the 17th (local time), the ECB held a monetary policy meeting in Ljubljana, Slovenia, and announced that it lowered the key interest rate from 3.65% per annum to 3.40%, and the deposit rate from 3.50% per annum to 3.25%, each by 0.25 percentage points.

The marginal lending rate was also reduced from 3.90% per annum to 3.65%.

The ECB bases its monetary policy mainly on the deposit rate among the three policy rates. According to Reuters, this is the first time in 13 years that the ECB has consecutively cut interest rates.

In June, the ECB cut all three policy rates by 0.25 percentage points, marking a shift in monetary policy after 1 year and 11 months. Initially, the market expected the ECB to cut rates once every quarter until the end of next year.

However, as Eurozone inflation eased faster than expected and concerns over economic contraction grew, the pace of rate cuts accelerated.

The Eurozone consumer price inflation rate for September, announced on the day, was 1.7%, 0.1% lower than the preliminary figure of 1.8%. This is the first time in 3 years and 5 months since April 2021 that the Eurozone inflation rate has fallen below the monetary authority’s target of 2.0%.