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April 17, 2025EUROPEAN CENTRAL BANK MONETARY POLICY The European Central Bank (ECB) announced today that it would reduce the three key ECB interest rates by 25 basis points. The interest rates on the deposit facility, main refinancing operations and the marginal lending facility will be at 2.25%, 2.40%, 2.65% respectively effective April 23rd.
The economic outlook is clouded by exceptional uncertainty as Euro Area exporters face new barriers to trade. The economy in the Euro Area is recovering and has built up some resilience against the global shocks and is projected to have grown in the first quarter of 2025. Manufacturing output has shown signs of stabilization. Unemployment fell 6.1% in February and wage growth is moderating. Rising productivity also meant that unit labour cost grew more slowly.
Annual inflation edged down to 2.2% in March. Energy prices fell by 1.0% and food price inflation rose to 2.9% in March. Goods inflation was stable at 0.6% and service price inflation fell to 3.5%. Most indicators of underlying inflation are pointing to a sustained return to 2.0% medium-term target.
Major escalation in trade tensions could result in lower Euro Area growth by dampening exports and weakening the global economy. On the other hand, the euro has strengthened over recent weeks as investor sentiment has proven more resilient towards the Euro Area than towards other economies. Falling energy prices and appreciation of the euro could put further downward pressure on inflation.
The asset purchase programme (APP) and Pandemic Emergency Purchase Programme (PEPP) portfolios are declining at a measured and predictable pace, as the Eurosystem does not reinvest all principal payments from maturing securities.
The Governing Council notes it is determined to see inflation sustainably stabilise at its 2.0% medium-term target and is ready to adjust all instruments within their mandate to achieve their goal. There is no pre-committed rate path. The next scheduled monetary policy meeting will be on June 5, 2025.
Source: European Central Bank: Monetary Policy Decisions; Monetary Policy Statement (Press Conference)
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