European Central Bank cuts interest rates for the first time since 2019: Live updates
What were the main concerns highlighted by ECB policymakers regarding euro zone inflation, particularly in services and wage inflation?
The main concerns highlighted by ECB policymakers regarding euro zone inflation were the stickiness of services inflation and wage inflation. Services inflation had edged higher to 4.1% from 3.7%, and core inflation, which excludes energy, food, alcohol, and tobacco, had also missed forecasts, rising to 2.9%. Additionally, wage inflation remained sticky, with domestic price pressures and inflation likely to stay above the 2% target well into next year.
How has the ECB's inflation outlook for the years 2024 to 2026 changed according to their latest projections?
According to the European Central Bank's (ECB) latest staff projections, the inflation outlook for the euro area has been revised as follows:
- For 2024, the average annual inflation is now expected to be 2.3%, down from the previous projection of 2.5%.
- For 2025, the inflation forecast has been lowered to 2.0% from the earlier projection of 2.2%.
- For 2026, the inflation projection remains unchanged at 1.9%.
These revised projections indicate that inflation is expected to decline gradually over the next few years, with the ECB's monetary policy measures playing a role in moderating price pressures2. The downward revisions for 2024 and 2025 suggest that the ECB expects inflation to ease more than previously anticipated, reflecting factors such as fading cost pressures and the impact of the central bank's monetary policy2.
What prompted the European Central Bank (ECB) to cut interest rates for the first time since 2019?
The European Central Bank (ECB) cut interest rates for the first time since 2019 due to an updated assessment of the inflation outlook, the dynamics of underlying inflation, and the strength of monetary policy transmission. The ECB Governing Council stated that it was now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady. This decision aimed to support the economy and keep inflation expectations well anchored.