Speech by Philip R. Lane, Member of the Executive Board of the ECB, MNI Webcast

Frankfurt am Main, 18 December 2024

Introduction

The Governing Council last week decided to lower the deposit facility rate – the rate through which we steer the monetary policy stance – from 3.25 per cent to 3.0 per cent. This decision was justified by our updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission. In my remarks, I would like to discuss these three elements of our reaction function.^[1][2]

The inflation outlook

The December Eurosystem staff projections expect headline inflation to average 2.4 per cent in 2024, 2.1 per cent in 2025 and 1.9 per cent in 2026. It is then projected to increase to 2.1 per cent in 2027 as a result of the expanded EU Emissions Trading System. The projections continue to foresee a rapid decline in core inflation, from 2.9 per cent this year to 2.3 per cent in 2025 and 1.9 per cent in 2026…