Minister McGrath notes today’s ECB monetary policy decision

Today (6th June) the ECB cut its three main interest rates by 25 basis points with effect from 12 June.
This represents the first rate cut since the beginning of the tightening cycle in July 2022.
The cut will bring the rates on the main refinancing operations, the marginal lending facility, and the deposit facility to 4.25 per cent, 4.5 per cent, and 3.75 per cent respectively.

The ECB today decided to cut its three main interest rates by 25 basis points. Commenting on the decision, Minister for Finance, Michael McGrath T.D. said:

“I note the ECB’s decision today to decrease its key interest rates by 25 basis points. This represents the first rate cut since the beginning of the tightening cycle in July 2022, with the ECB having raised rates by a cumulative 4.5 percentage points between July 2022 and September 2023.

“The decision to cut rates today is based on an updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission. Indeed, inflation in the euro area stood 2.6 per cent in May, down from its peak of 10.6 per cent in late 2022. Forecasts published by the ECB today show euro area inflation expected to average 2.5 per cent this year. The Governing Council have said that any further cuts will continue to follow a data-dependent approach.

“Today’s announcement will be welcomed by many households and firms who have grappled with the effects of high inflation and the associated monetary policy tightening needed to bring inflation under control over the past two years. Much progress has been made in reducing inflation, with headline inflation in Ireland having fallen from its peak of 9.6 per cent in mid-2022 to 1.9 per cent in May.

“Looking ahead, the continued easing of inflation and future interest rate cuts should help to support the purchasing power of households, underpinning growth in the domestic economy. Indeed, data released by the Central Statistics Office today shows robust growth in Modified Domestic Demand in the first quarter of the year – growing by 1.4 per cent on a quarterly basis.

“While today’s announcement is undoubtedly a positive development, I am conscious that many households are still facing cost of living pressures. It is important going forward that the correct balance is struck between providing supports to those still affected by the recent rise in prices while ensuring that fiscal policy does not act to put inflation on an upward path once more. The publication of the Summer Economic Statement in the coming weeks will set out the fiscal parameters of Government’s budgetary policy ahead of discussions on spending and taxation changes that will be presented in the Budget.”

ENDS

Note to editors:

Modified (final) domestic demand, a proxy for the domestic economy, is the sum of consumer spending, government spending and investment, excluding investment in imported IP and aircraft for leasing. It also excludes changes in the value of stocks.