English
ECB cuts interest rates by 25 basis points
The European Central Bank announced a 25 basis point interest rate cut on Thursday, the fifth cut since the ECB began easing monetary policy in June last year.
The cut takes the ECB’s key interest rate to 2.75%. Markets had been pricing in a 25 basis point cut at more than 90% before the announcement.
The ECB is trying to balance accelerating inflation in the eurozone in recent months with slowing economic growth in the region. Eurozone headline inflation rose for the third straight month to 2.4% in December, after falling below the ECB’s 2% target several months ago. Inflation is expected to resume rising as the underlying effects of lower energy prices fade.
Preliminary data released on Thursday showed the euro zone economy stabilised in the fourth quarter of 2024. Economists polled by Reuters had forecast growth of 0.1% in the period, after a 0.4% expansion in the three months to the end of September.
Markets will be closely watching European Central Bank President Christine Lagarde’s press conference after the announcement amid uncertainty surrounding the policies of newly inaugurated US President Donald Trump.
Investors are keen to gauge the ECB’s comfort level in deviating from the US Federal Reserve in terms of monetary policy and potential easing. The Fed on Wednesday left interest rates unchanged, in line with expectations. Markets are generally pricing in fewer rate cuts from the Fed than the ECB this year.
