The ECB is pursuing its monetary relaxation policy and lowers its main key rate – Liberation

It’s the eighth Decrease in guiding rates for the European Central Bank in one year. The monetary institution established in Frankfurt and managed by the Frenchwoman Christine Lagarde again announced this Thursday, June 5, a downward revision of its main rate, that on bank deposits, which goes from 2.25 % to 2 %. A decrease « Based on its updated assessment of inflation prospects ».

Anticipated by markets and economists, this drop in rate comes two days after the right figures for inflation in May in the euro zone. Tuesday, Eurostat measured the price increase at 1.9 % over a year, its lowest level since September 2024. It is just below the 2 % target that the ECB sets in the medium term. This Thursday, the central bank revised its inflation forecasts for 2025 (2 % rather than 2.3 %) and 2026 (1.6 % against 1.9 %). Projections which it explains by the decrease in energy prices and the appreciation of the euro.

« Inflation and the European economy slow down, this gives the ECB two good reasons to lower the rates », Analysis François Geerolf, economist at the French Observatory for Economic Conditions (OFCE). Because by thus lowering « the price of money », the European Central Bank hopes to relaunch the credits that traditional banks grant to businesses and households to stimulate growth and reduce unemployment.

Does that mean that the European Central Bank will now delay on rate drops? Possible. During her press conference on Thursday, Christine Lagarde said that« At the current level of interest rates », The institution has arrived « At the end of a monetary policy cycle ».

The fact remains that there is always debate on the real effects on the economy of such maneuvers. For François Geerolf, « We must not overestimate the effects of monetary policy » because « States’ fiscal policy has much more impact ». As such, the economist is not convinced that he should be attributed The complaint of inflation to ECB’s rates policy, but rather down the energy prices. He calls to look at the next budget signals from a Germany to the Moribonde economy and those of France, including Expenditure reduction objectives are clearly displayed by the government.

On the other hand, for François Geerolf, the reversal of the ECB should have « Positive direct effects on real estate credits and the construction sector », Struck hard by the sudden increase in guiding rates between July 2022 (0.5 %) and September 2023 (4.5 %). In this regard, he believes that the ECB at the time « Increased the difficulties of the European economy (by these increases), when the continent was going through an industrial crisis and an energy crisis ».

This brutal level of rate increases has also greatly affected public accounts of member countries. Because this sudden change in policy has weighed on the finances of the Central Bank, which has stopped paying dividends to the shareholder states. The shortfall amounts to 4 billion euros on average per year for the French State. And more indirectly, the increase in rates has largely increased interest rates paid by states on their public debt.

In addition, the ECB at the same time carries out another policy, called « quantitative tightening », which partly cancels the relaxation effect of its rates. This process takes the form of a drastic decrease in the volume of loans granted and the obligations held by the institution. As Recalled it last February Piero Cipollone, member of the Management Board of the European Central Bank,, « For the first time in the history of the ECB », The institution has « Two monetary policy tools working in opposite directions ». Because the quantitative tightening has the effect of drying the liquidity available on the market and pushing the rent of money – the interest rate -, the reverse of the effects of the drop in the key rate.

Update at 4:10 p.m. With a declaration by Christine Lagarde.