The outcome of the September meeting was broadly in line with expectations. The ECB announced a unanimous 25 basis point rate cut, bringing the deposit facility rate to 3.50% (the second cut of the year). The decision was also accompanied by a new set of economic projections.
The decision was supported by the latest inflation readings, which confirmed the bank’s June projections that the disinflationary trend remained in place, as well as by the weakening of economic growth in the region.
Lagarde noted that although wage growth remains too high, labour market tensions are easing, ultimately contributing to the disinflationary trend. Nevertheless, she stated that the labour market remains “resilient.”
Headline inflation projections were left unchanged for 2024, 2025 and 2026; however, core inflation projections were slightly revised upwards for this year and next. Both headline and core inflation are expected to reach the ECB’s target by 2026.
GDP growth was revised down by 0.1 percentage points for 2024, 2025 and 2026, based on weaker-than-expected domestic demand. The ECB President also noted that growth risks remain tilted towards an economic slowdown.
Although Lagarde stated that the path of interest rates is clearly downward, she provided no guidance on the size or timing of future rate cuts, emphasising that decisions will be taken on a meeting-by-meeting basis and will continue to be data-dependent (not on any single data point, but on overall data trends).
Overall, as mentioned, both the decision and the projections were largely in line with expectations and, given the lack of forward guidance, it remains uncertain when the next rate cut will occur.
This communication has been prepared by Banco Finantia for informational purposes only and does not constitute investment advice. In preparing this communication, no consideration was given to investors’ investment objectives, financial situation, or specific needs. Accordingly, the information has not been tailored to any actual or potential investor, nor have any specific circumstances relating to such investors been taken into account.
The information disclosed is based on market conditions prevailing at the time, as well as on information obtained from recognised third-party entities, which are public sources. Banco Finantia has not independently verified the data or information provided by those entities. As the recipient of this communication is aware of this situation, Banco Finantia cannot, under any circumstances, be held liable for any errors, omissions, or inaccuracies contained in this document or arising from the use of such information. Banco Finantia accepts no responsibility for any direct or indirect losses or damages that may be incurred by those who carry out transactions based on the information provided.
Banco Finantia’s investment policy, whether acting on its own account or on behalf of its clients, is entirely independent of the content of this communication. The Banco Finantia Group may hold positions in, or trade, the securities or financial instruments referred to herein, before or after the issuance of this communication, and may also provide, or seek to provide, banking services to the issuers of such securities or financial instruments.
Banco Finantia’s competent supervisory authority is the CMVM, with which it is registered under number 109.
