ECB Cuts Interest Rates by 25 Basis Points as Eurozone Growth Slows

The European Central Bank (ECB) has cut interest rates by 25 basis points, as widely expected, in an effort to support the struggling Eurozone economy. However, policymakers refrained from outlining a clear trajectory for future monetary policy moves.

ECB Lowers Key Rates Amid Economic Uncertainty

In its latest policy decision, the ECB reduced the key deposit rate from 3.0% to 2.75%, while lowering rates for main refinancing operations and the marginal lending facility to 2.9% and 3.15%, respectively.

The move comes as the Eurozone continues to battle economic headwinds, with the ECB acknowledging that while the disinflation process is progressing, growth remains weak.

ECB Rate Cuts in 2024: A Response to Economic Slowdown

So far in 2024, the ECB has implemented four rate cuts, aiming to counter slowing economic activity and signs that the recent inflation surge—the highest in decades—has been effectively curbed by restrictive monetary policy.

Will the ECB Cut Rates Again in 2025?

Investors and analysts were eager for clues about future rate cuts in 2025, but the ECB maintained a data-dependent approach, stating that it is "not pre-committing to a particular rate path" and will assess conditions on a meeting-by-meeting basis.

Despite this cautious stance, analysts at Capital Economics suggest the ECB remains confident that inflation will soon return sustainably to its 2% target. While borrowing costs are coming down, the ECB emphasised that its monetary stance is still restrictive.

Market Outlook: What’s Next for the Eurozone?

With the ECB keeping future rate decisions flexible, markets will closely watch inflation trends, economic growth data, and central bank commentary for signs of further monetary easing.

(Sources: investing.com, reuters.com, ChatGPT)