The fight against inflation is not completely won yet. Inflation is expected to continue slowing down, and the latest interest rate cut should aid economic recovery.
This was stated by ECB Governing Council member Olli Rehn in response to the European Central Bank’s (ECB) decision, according to Reuters.
Rehn, who is also the Governor of the Finnish Central Bank, mentioned that on Thursday (June 6), the ECB sent a positive signal for the economy. Significant inflationary pressures have eased, and the reduction in interest rates will support the recovery of growth. On Thursday, the ECB cut interest rates by 25 basis points, easing monetary policy for the first time in nearly five years.
The key interest rate was reduced from a record level of 4.5% to 4.25%, and the deposit rate was similarly lowered from a record 4% to 3.75%. The ECB highlighted the progress in curbing inflation, although it added that the battle against it is not yet fully won.
Additionally, Rehn stated that the total reduction in interest rates over the next few years could be one to two percentage points, provided that there are no new economic shocks. He also emphasized that this is only an assumption, not an official ECB forecast.
