On Thursday 6 March, the Governing Council of the European Central Bank (ECB) cut its three key interest rates by 25 basis points. The deposit facility rate, the benchmark interest rate and the marginal lending rate will be cut to 2.50, 2.65 and 2.90% respectively, with effect from Wednesday 12 March.
“The decision is based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission”, explained ECB President Christine Lagarde at a press conference.
According to the ECB, the disinflation process is following a well-established trajectory and the latest projections are closely aligned with the previous inflation outlook. ECB staff now estimate that headline inflation will average 2.3% in 2025, 1.9% in 2026 and 2.0% in 2027.
The upward revision to headline inflation for 2025 reflects stronger momentum in energy prices. For inflation excluding energy and food, the forecasts are 2.2% in 2025, 2.0% in 2026 and 1.9% in 2027.
On Thursday, as the EU27 met in Brussels to urgently strengthen the EU’s defence (see other news), the ECB president highlighted that the “landscape that we have at the moment is clouded with uncertainty”, underlining the risks associated with potential fluctuations in energy prices, changes in trade policies and the emergence of new large-scale investment programmes. (Original version in French by Bernard Denuit)