(MENAFN) On Thursday, the European Central Bank (ECB) announced a 25 basis point reduction in its three key interest rates, in line with market expectations. The rate cuts, effective from December 18, reflect the bank's updated assessment of the inflation outlook, according to a statement released by the ECB.

The new rates will set the deposit facility at 3.00 percent, the main refinancing operations at 3.15 percent, and the marginal lending facility at 3.40 percent.

The ECB noted that the disinflationary process is progressing as expected. It projects that headline inflation will average 2.4 percent in 2024, 2.1 percent in 2025, 1.9 percent in 2026, and 2.1 percent in 2027. A flash estimate indicated that headline inflation in the euro area increased to 2.3 percent in November, up from 2 percent in October.

"For inflation excluding energy and food, staff project an average of 2.9 percent in 2024, 2.3 percent in 2025, and 1.9 percent in both 2026 and 2027," the ECB added in its statement.

Core inflation, which excludes the more volatile categories of food, energy, alcohol, and tobacco, remained steady at 2.7 percent in November, indicating that underlying price pressures are stabilizing. The ECB’s decision to lower rates reflects its confidence in the ongoing progress towards inflation stabilization across the euro area.

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