The European Central Bank (ECB) announced its monetary policy decision to cut interest rates by 25 basis points, marking the fourth consecutive reduction this year.

The ECB stated that the deflation process is progressing well. The Governing Council expects average inflation rates to reach 2.4% in 2024, 2.1% in 2025, 1.9% in 2026, and rise slightly to 2.1% in 2027, coinciding with the implementation of the expanded EU Emissions Trading System.

As a result, the interest rates for the deposit facility, main refinancing operations, and marginal lending facility will be reduced to 3.00%, 3.15%, and 3.40%, respectively, effective December 18, 2024.

For core inflation—excluding energy and food—the ECB forecasts averages of 2.9% in 2024, 2.3% in 2025, and 1.9% for both 2026 and 2027.

Most measures of underlying inflation suggest it is stabilizing near the medium-term target of 2% set by the Governing Council. Domestic inflation has eased but remains elevated due to the delayed adjustment of wages and prices in certain sectors following the prior inflation surge.

For 2025, experts anticipate further rate cuts, projecting the deposit facility rate to decline to 2% by June and 1.5% by year-end. However, uncertainties remain regarding the pace and depth of these adjustments as economic risks persist.