Next ECB Meeting 2024: First Rate Cut in 5 Years

Several actors can influence financial markets, and the ECB undoubtedly plays a main role.

For this reason, as an investor, it is important to stay updated on the meetings and occasions in which the central bank’s monetary policies are determined. Below is the ECB meeting calendar for 2024.

Next ECB meeting

There are two types of meetings by the governing council of the European Central Bank (ECB):

1. Meetings for monetary policy decisions: These meetings are held every six weeks. In them, the ECB Governing Council assesses the economic and financial situation and decides on interest rates and other monetary policy measures to maintain price stability in the euro area.
2. Meetings for other types of decisions: These meetings occur every 2 weeks. They cover a wide range of topics that are not directly related to monetary policy decisions, such as banking supervision, financial stability and other administrative and organizational matters of the ECB.

Next ECB meeting: 2023 monetary policy calendar

Below are the latest dates of the ECB’s monetary policy meeting calendar that took place in 2023:

• 14/12/2023: ECB Governing Council: monetary policy meeting in Frankfurt  
• 14/12/2023: press conference at the end of the ECB Governing Council meeting in Frankfurt

ECB Meeting Calendar in 2024

Now let’s look at the complete ECB calendar for 2024 for monetary policy meetings:

• 25/01/2024
• 07/03/2024
• 11/04/2024
• 06/06/2024
• 18/07/2024
• 12/09/2024
• 12/12/2024

If you want to stay updated on monetary policy movements, find out when the next FED meeting, chaired by Jerome H. Powell, is.

Who forms the ECB Governing Council?

The ECB Governing Council comprises the executive board members and the governors of the national central banks of the euro area countries.

1. The Executive Board: This board includes the President of the ECB – in this case Christine Lagarde – the Vice-President, and four other members. All of them are appointed by the heads of state or government of the euro area countries, with a non-renewable eight-year term.  
2. The Governors of the National Central Banks: These are the governors of the central banks of the 19 euro area countries. Each governor represents their respective national central bank within the Governing Council.

The Governing Council is the ECB’s main decision-making body, responsible for formulating the euro area’s monetary policy. This includes decisions such as setting interest rates and, in general, managing the money supply to maintain price stability and support general economic policies in the European Union.

What is the main mandate of the ECB?

The European Central Bank (ECB) has the primary objective of maintaining price stability in the euro area, which means keeping inflation low, stable, and predictable. This has not happened in recent years, hence the movement and expectations of interest rate hikes and cuts.

Observe in the graph how, after several years of controlled inflation, always below 2%—sometimes even at 0% or even negative—in 2022, it shot up to 10%, to end up falling back to around 2.5% in the current months.

This fact forced the ECB to aggressively raise interest rates throughout 2022 and 2023, as it was not fulfilling its sole mandate, which we remember was to maintain price stability, and therefore, eliminate inflation.

However, as of June 2024, Christine Lagarde has declared the period of maximum rates over, and has already ordered the first 0.25-point cut, which she expects to continue in upcoming meetings.

The 3 interest rates controlled by the ECB

Although we always tend to mention the control of interest rates, the truth is that the ECB controls 3 types:

1. Deposit Facility: It is the interest rate that banks receive for depositing funds in the ECB overnight. This rate aims to influence banks to deposit or withdraw their excess liquidity.
2. Main Refinancing Operations Rate (MRO, by its acronym in English): It is the main interest rate that the ECB charges for lending money to banks for one week through open market operations.
3. Marginal Lending Facility (MLF, by its acronym in English): It is the rate at which banks can obtain overnight loans from the ECB as a last resort, using eligible assets as collateral.

The news: first interest rate cut in 5 years (0.25 points)

The European Central Bank (ECB) reduced the three key interest rates by 25 basis points, marking the first cut in the main rate since 2016 (almost 10 years ago) and the deposit rate since 2019.

In this way, and until the next meeting where it will be seen what happens, the three main rates are as follows:

• Deposit Facility: 3.75%
• Main Refinancing Operations Rate: 4.25%
• Marginal Lending Facility: 4.5%

This decision comes after a notable moderation of inflation in recent months—from around 5% a year ago to 2.4% in April 2024—although inflationary risks persist, as evidenced by the increase to 2.6% in May 2024.

Rate cut, economic growth forecast, and… persistence in inflation

However, Lagarde and her team believe that this first-rate cut will kickstart the revival of the European economy

Indeed, the ECB’s forecasts show a stronger-than-expected economy, with economic growth and inflation revised upwards for 2024 and 2025.

In fact, headline inflation is expected to reach 2.5% in 2024 (compared to the previous 2.3%), 2.2% in 2025, and 1.9% in 2026, while the projected economic growth is 0.9% in 2024 (previously 0.6%), 1.4% in 2025, and 1.6% in 2026.

The celebrations for the 25 basis point rate cut made today by the ECB are likely to be, at best, moderate, given that the decision was fully priced in by financial markets and that the latest data on inflation and wages have lowered expectations of a rapid easing cycle.

Statements by Andrew Kenningham, analyst at Capital Economics:

Indeed, precisely in light of the persistence of the last stretch of inflation, as well as the unprecedented wage growth in the eurozone (in recent years), the ECB has toughened its message compared to April. Although they acknowledge a decrease in core inflation, they warn that domestic price pressures remain strong.

In the words of the minutes signed by senior ECB officials, they have stated the following:

The ECB continues to apply a data-dependent and meeting-by-meeting approach to determine the appropriate level and duration of the restriction. In this way, the ECB is committed to keeping official interest rates sufficiently restrictive for as long as necessary to achieve the 2% inflation target.

The big question that keeps us on edge:

Given some economic stagnation in recent quarters (as well as the debt problem), is this first cut to calm the markets, or are we facing a definitive shift in monetary policy that will continue in the coming quarters?

In future meetings, We will only know about the upcoming inflation and economic growth data.

What role do central banks play in the markets?

The central bank performs several functions.

• Interest rate control: First, it sets the interest rates at which it lends to commercial banks in the eurozone. Monetary policy decisions directly affect the money supply and inflation, influencing financial markets. In this way:
  • The announcement of restrictive monetary policies is associated with a cautious or selling attitude by financial markets and vice versa.
  • Expansive monetary policy announcements are associated with cheaper credit and a buying attitude in financial markets.

• Supervisory function: On this occasion, the ECB also contributes to implementing controls over institutions and markets together with national authorities, ensuring the safety and soundness of the banking system.

In this way, the European Central Bank plays a fundamental role in guiding the economy of the Eurozone, so it is not surprising that every time one of its meetings approaches, investors face the crucial question: where to invest?

The decisions made by the ECB can significantly impact the performance of stocks in the European market. Many look at the best Eurostoxx stocks as a barometer to assess the market’s reaction to news from the ECB.

In periods of uncertainty or expectations of changes in monetary policy, defensive stocks, known for being less sensitive to economic fluctuations, become particularly attractive. However, the ECB’s decisions can also offer opportunities for those who know where to look, making the selection of the best stocks to buy both a challenging and rewarding exercise.

Ultimately, as investors and also as private citizens, it is of great interest to us to know when the next ECB meeting will be held. This will dictate the course of the Eurozone’s monetary policy and, with it, the increase or decrease in the cost of credit that will stimulate or cool the economy and markets.

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