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watch nowThe European Central Bank delivered an expected quarter-point interest rate cut this week — and alongside the announcement came several indications that rates will swiftly move even lower early next year. Economists also jumped on the removal of the ECB's message that the central bank must "keep policy rates sufficiently restrictive for as long as necessary." She also said that a larger, half-point cut had been debated, and that Governing Council (GC) members unanimously voted to reduce rates. The ECB cut the deposit facility — its key rate — to 3% on Thursday. What constitutes the neutral rate has been a key point of debate in recent months, and Lagarde said Thursday that while it had not been discussed at the December meeting, staff saw it between 1.75% and 2.5%.
Persons: Christine Lagarde, Robert Holzmann —, , Holzmann, Lagarde, Francois Villeroy de Galhau Organizations: European Central Bank, ECB, Reuters Locations: Frankfurt, Austrian
A sign for the European Central Bank (ECB) outside the bank's headquarters in Frankfurt, Germany, on Thursday, Feb. 2, 2023. Alex Kraus | Bloomberg | Getty ImagesEuropean Central Bank policymakers are reconsidering the path of interest rate hikes in light of last month's banking turmoil, but remain committed to reining in core inflation. However core inflation — which excludes volatile energy, food, alcohol and tobacco prices — rose to an all-time high of 5.7%. But he said policymakers will be examining the data for signs that core inflation is coming down and the bank's medium-term inflation target of 2% is within sight. So yes we are worried about the core inflation not yet peaking," Scicluna said.
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