The Governing Council of the European Central Bank (ECB) is meeting today, which, based on all estimates, is expected to reduce its key interest rates by 25 basis points, in the second corresponding reduction since June 6.
The ECB's decisions will be announced by ECB President Christine Lagarde and Vice President Luis de Guidos, in an interview at 15:45 Cyprus time
In his note, the chief economist of Germany's Berenberg, Holger Schmitting, said that inflation in the eurozone has fallen to 2,2%, while downside risks to growth are increasing.
"As a result, the ECB is likely to cut its key interest rate, i.e. the deposit facility, by 25 basis points to 3,5%, without giving any further indication of the future pace and extent of monetary policy easing and will state that this will depend on the evidence," he noted.
He pointed out that the ECB is expected in the next session of October to proceed with a pause in the reductions, (as was done in July), before proceeding with the next reduction again by 25 basis points in the session of December 12.
Today's expected reduction is largely considered a given, since all the central bankers, members of the ECB's Board of Directors have given indications for a new reduction of 25 basis points, including Joachim Nagel, the President of the German Federal Central Bank, who indicated that will support the decision if the evidence warrants it.
In addition, ECB Governing Council members will today also receive the new quarterly forecasts from ECB analysts, with Berenberg estimating that the medium-term forecast will remain unchanged at 1,9% for inflation (2% structural inflation). , and 1,6% for the growth rate in the eurozone in 2026.
It is recalled that after the reduction on June 6, the ECB's key interest rates were set at 3,75% for the deposit acceptance facility, at 4,25% for the main refinancing operations rate and at 4,50% for the marginal financing facility rate .
A reduction of 60 points in loans?
Meanwhile, reports claim that today's session the ECB's Governing Council may make an unconventional move, cutting its lending rates by 60 basis points, so as to eliminate an asymmetry that was a byproduct of the monetary easing cycle during the deflationary years, that is, when the deposit acceptance rate was negative, while this could not be done for the other two lending rates.
As reported by Bloomberg, the ECB is considering reducing the difference between the deposit rate (the rate commercial banks receive when they deposit their liquidity with the Eurosystem's Central Banks) and the other two lending rates from 50 basis points , which is currently at 15 units.
According to the agency, changes to the other two lending rates are seen as technical adjustments and will not mean any change in monetary policy, since banks monitor the deposit rate to clear borrowing costs in the real economy. Consequently, such a move, if confirmed, would not be expected to impact borrowers.