- Prior decision
- Deposit facility rate 2.25% vs 2.25% expected
- Prior 2.50%
- Main refinancing rate 2.40% vs 2.40% expected
- Prior 2.65%
- Marginal lending facility 2.65%
- Prior 2.90%
- *Reference to restrictive policy is omitted*
- The disinflation process is well on track
- Determined to ensure that inflation stabilises sustainably at its 2% medium-term target
- Not pre-committing to a particular rate path
- Will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance
- Decisions will be based on assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission
- Full statement
That’s a quick shift in removing the reference to restrictive policy after the change in March last month. As a reminder, the ECB tweaked their language to indicate that “monetary policy is becoming meaningfully less restrictive” in the last meeting. And now, they’ve removed that completely.
But as mentioned here, it doesn’t mean that they are going to confirm that rates have reached neutral territory nor does it mean rate cuts will stop moving forward. The overall outlook remains the same but this is sort of a hedge against the risks put forward by US tariffs and the potential impact on the euro area economy and inflation.
Lagarde will have some answering to do on the removal of the phrase later but overall, she should glide through it and keep emphasising on the increased uncertainty from the tariffs war.
In terms of economic projections, core inflation is seen averaging 2.2% in 2025, 2.0% in 2026, and 1.9% in 2027. As for growth, that is downgraded with the economy seen expanding by just 0.9% in 2025, 1.2% in 2026, and 1.3% in 2027 now.
The euro is lightly changed on the decision, with EUR/USD still down 0.5% at 1.1340 currently.
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