ECB cuts rates for fifth time since June as Eurozone stagnates
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The news: The European Central Bank cut its deposit rate by 25 basis points to 2.75%, the lowest since early 2023.
The numbers: It was the central bank’s fifth reduction since June and was an unanimous decision by the members of the governing council.
The decision followed Eurostat data showing the Eurozone economy stagnated in Q4 2024.
ECB President Christine Lagarde warned of economic “headwinds” and said growth risks remain “tilted to the downside,” citing weak consumer confidence and global trade frictions.
Inflation fell from 10.6% in 2022 to 2.4% in December 2024, and the ECB expects it to reach its 2% target in 2025.
The euro rose slightly to USD1.043 after the decision, which followed the US Federal Reserve decision to keep rates unchanged a day earlier.
The context: Markets anticipate two or three more cuts this year, with some economists predicting a drop to 1.5%.
In its statement, the ECB said monetary policy remains restrictive despite the cuts, signalling more cuts ahead. At the press conference, Lagarde said that, with policymakers facing “significant and probably rising uncertainty”, it was not possible to give firm forward guidance.
She added the governing council did not have any discussion “about the point where we have to stop [cutting interest rates]” during its meeting on Thursday.
“We know the direction of travel, this is the direction we will take,” she said, maintaining that future rate decisions would be data-driven.
The sources: ECB, Financial Times
