ECB Cuts Rates as Expected, Lowers Inflation,…

From Morningstar: 2024-12-12 09:58:27

The European Central Bank cut its key interest rate by 0.25 percentage points to 3.00% and revised down growth and inflation forecasts for 2024-2027. The ECB signaled an easing bias and left the door open for further cuts in 2025. Economists expect another 100 basis points of rate cuts next year.

The ECB’s key interest rates stand at: Deposit facility rate – 3.00%, Main refinancing rate – 3.15%, Marginal lending facility – 3.40%. The Swiss National Bank made a steeper-than-expected 0.5 percentage point rate cut due to low inflation and a strong Swiss Franc. The US Federal Reserve and Bank of England will announce their rate decisions soon.

The ECB lowered its inflation and growth outlooks. Inflation forecasts for 2024-2027 were adjusted, with staff projecting lower figures than previously estimated. Eurozone GDP growth projections were also revised downwards for the next few years. Eurozone inflation currently stands at 2.3%, slightly above the ECB’s 2% target rate.

After the ECB’s rate cut, European stocks turned slightly positive and the euro weakened against the dollar. Political uncertainties in France and Germany are affecting the eurozone. Chancellor Olaf Scholz’s confidence vote in Germany has led to volatility in bund yields. The ECB and US Federal Reserve are taking different paths on interest rates.

Rate cuts typically boost equity markets and bond prices, while lowering savings account rates. Borrowers benefit from cheaper debt, while savers see lower returns on deposits. The impact of rate cuts on markets depends on various factors. The ECB’s meetings in 2025 have not been disclosed. 1. The stock market is experiencing a record-breaking surge, with the S&P 500 hitting an all-time high of 4,300 points. Analysts attribute the increase to strong economic data and positive earnings reports from major companies.

2. In a groundbreaking study, researchers have discovered a new potential treatment for Alzheimer’s disease. The drug, currently in the early stages of development, has shown promising results in reversing memory loss in mice. Human trials are set to begin soon.

3. The United Nations has reported a staggering increase in the number of people facing severe hunger worldwide. Over 270 million people are now classified as experiencing “acute food insecurity,” a 40% rise compared to last year. The ongoing COVID-19 pandemic has exacerbated this global crisis.

4. Climate activists are celebrating a major victory as a federal judge has ruled against a proposed oil drilling project in the Arctic. The decision cited the potential environmental impact on wildlife and Indigenous communities in the region. This marks a significant win for conservation efforts.

5. The Tokyo Olympics are set to proceed without spectators, following a state of emergency declared in Japan due to rising COVID-19 cases. The decision comes as a disappointment to many fans and athletes, but organizers are prioritizing public health and safety during the event.



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