ECB Cuts Interest Rates by 25 Basis Points

The Governing Council of the European Central Bank (ECB) decided to cut interest rates by 25 basis points for a third consecutive time.

This is the first time the ECB has reduced rates in consecutive meetings since December 2011. The deposit facility rate, through which the ECB signals its monetary policy direction, is now set at 3.25%.

The decision, which was not expected in recent weeks as shown in the minutes of the September meeting, follows data indicating that the eurozone economy is in worse shape than when policymakers last met. At the same time, inflation in September fell below the bank’s target, dropping to 1.8%.

The decision, as stated in the European Central Bank’s announcement, “is based on its updated assessment of inflation prospects, underlying inflation dynamics, and the strength of monetary policy transmission. Incoming inflation data indicate that the deflation process is on track. Inflation prospects are also affected by recent downside surprises in economic activity indicators. Meanwhile, financing conditions remain tight.”

“We cut our key interest rates by 0.25 percentage points. We did this because incoming data show we are well on track to reach our inflation goal, a post on the official ECB X account read.