欧美文化:Roundup: ECB embarks on winding down restrictive policies with interest rate cut

FRANKFURT, June 7 (Xinhua) -- The European Central Bank (ECB) moved to cut key interest rates by 25 basis points on Thursday, emboldened by projections that are suggesting a gradual decline of inflation on the horizon.

It is the first time that the central bank has cut rates in years during which rates were hiked at an uNPRecedented pace and monetary stance went remarkably restrictive. The decision made by the ECB on Thursday signals the start of a process which will steer its policies away from restrictiveness.

The three key interest rates, i.e. the interest rates on the main refinancing operations, the marginal lending facility and the deposit facility, will be decreased to 4.25 percent, 4.5 percent and 3.75 percent, respectively, from June 12, the central bank said in a statement.

"Based on an updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady," the statement said.

Commenting on the decision at a press conference following the governing council meeting, ECB President Christine Lagarde pointed out that it is the first rate cut made by the central bank in many years.

Back in June 2014, the ECB moved into the uncharted territory of negative interest rates of deposit and kept the interest rates at ultra low levels until September 2019.

In recollection, Lagarde noted that the inflation stood at the peak of 10.6 percent in October 2022 and halved to 5.2 percent in September 2023. Within that time frame, the ECB hiked interest rates by 450 basis points to historically high levels.

From September 2023 till now, the ECB held the interest rates steady and the euro zone inflation continued to drop to 2.6 percent, remarked Lagarde.

Looking ahead, the central bank expects inflation to fluctuate around current levels for the rest of the year before declining towards the target level over the second half of next year, standing at 2.5 percent in 2024 and 2.2 percent in 2025 respectively.

The trajectory of inflation movement in the euro zone is a proof that the transmission of monetary policy has been taking effect, the ECB mentioned in its press release repeatedly.

The confidence of the central bank about the path of disinflation ahead was the overriding reason behind its decision to cut rates on Thursday, said Lagarde.

Although the rate cut has sent a clear message that the ECB has started to scale back restrictive measures, Lagarde insists that the central bank will continue to be data-dependent in making its future rate decisions.

There are still "bumps" on the road ahead, and the ECB needs to "constantly confirm that we are on this disinflationary path," said Lagarde.