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Accordingly, the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will be decreased to 2.75 per cent, 2.90 per cent and 3.15 per cent respectively with effect from February 5.
The decision to lower the deposit facility rate, the rate through which the governing council steers the monetary policy stance, is based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, an ECB release noted.
The central bank targets eurozone inflation at 2 per cent.
Domestic inflation remains high, mostly because wages and prices in certain sectors are still adjusting to the past inflation surge with a substantial delay. But wage growth is moderating as expected, and profits are partially buffering the impact on inflation.
The rate cuts are gradually making new borrowing less expensive for firms and households. At the same time, financing conditions continue to be tight, also because monetary policy remains restrictive and past interest rate hikes are still transmitting to the stock of credit, with some maturing loans being rolled over at higher rates, ECB said.
The economy is still facing headwinds but rising real incomes and the gradually fading effects of restrictive monetary policy should support a pick-up in demand over time, it added.
Fibre2Fashion News Desk (DS)