European Central Bank lowers key policy rates by 25 bps

The European Central Bank slashed its main refinancing operations rate by 25 basis points to 4.25% at its June policy meeting, as widely expected.

Additionally, the deposit facility rate was reduced to 3.75%, while the marginal lending rate – to 4.5%.

This has been the first cut in the ECB’s key interest rates since 2016 due to a considerable slowdown in inflation to less than half of 2023 levels.

Yet, despite progress on inflation, domestic price pressures are still elevated, the ECB said. Therefore, to address these challenges, policy makers aim to keep benchmark rates at a sufficiently restrictive level and to maintain a data-dependent approach.

The Eurosystem staff forecasts for both headline and core inflation were raised for this year and for 2025.

The Euro was 0.18% firmer on the day against the US Dollar, with the EUR/USD currency pair last trading at 1.0888.

The major Forex pair went up as high as 1.0902 immediately after the policy decision.