KOF Monetary Policy Communicator for the Euro Area, September 2024

The ECB’s Governing Council has resumed monetary loosening after its pause in July. The three key ECB interest rates will be lowered by different amounts, reflecting changes to the ECB’s operational framework. The deposit facility rate will be decreased to 3.50%, the main refinancing operations rate to 3.65% and the marginal lending facility rate to 3.90%.

Annual HICP inflation in the euro area has decreased to 2.2% in August, from 2.6% in July. Food price inflation edged up to 2.4% past month and energy prices dropped by 3.0%, after the 1.2% increase in July. Goods inflation fell by 0.3 percentage points compared to the July reading of 0.7%. Services inflation edged up to 4.2% and remains sticky. While wages continue to exert strong price pressures, labour cost growth is slowing. The ECB is expecting a moderating wage growth and productivity recovery over its projection horizon. Most measures of longer-term inflation expectations currently stand at around 2%.