The European Central Bank lowered interest rates by 25 basis points on Thursday and updated the language when it decided that monetary policy became “meaningful reduction in restrictiveness.”
The cuts raised the ECB’s deposit facility rate, its key interest rate, to 2.5%, a move that was widely invested before the announcement was announced.
“Monetary policy is getting less and less, as lower interest rates are making new borrowings for companies and households cheaper, and loan growth is increasing,” the central bank said in a statement Thursday.
This marks a change in the ECB’s January comments, when central banks still describe their monetary policy stance as restrictive.
The central bank has undergrown economic growth in the region over the past nine months, and the central bank’s reduction rate has been reduced with the sense of humor of tariffs imported into the United States.
Despite the last few months of 2024, the eurozone title inflation remains below 3%.
Data released earlier this week suggests inflation In February, the region dropped to 2.4%, lower than January readings, but slightly higher than expected. The so-called core inflation – deprived of food, energy, alcohol and tobacco costs – and the inflation in service also fell after months of proving stickiness.
The ECB reiterated on Thursday that the dissolution process was “normal”, but pointed out that domestic inflation is still “high”.
It added: “Most measures of basic inflation suggest that inflation will be positioned at the Council’s 2% medium-term target on a sustained basis.”
Adjustment of economic prospects
The central bank also released its latest economic forecast on Thursday.
“Staff are now seeing title inflation of 2.3% in 2025, 1.9% in 2026 and 2.0% in 2027. The rising revision of title inflation for 2025 reflects stronger energy price dynamics,” the bank said.
In December, the central bank still expects inflation to be 2.1% in 2025.
With this European Statistics Office show.
ECB staff forecasts revised the region’s economic growth outlook on Thursday on the grounds of “continuous challenges.” Now it is expected to grow by 0.9% in 2025, 1.2% in 2026 and 1.3% in 2027.
The previous one It is forecast to grow by 1.1% this year.
“The downside revisions for 2025 and 2026 reflect lower exports and continued weak investments, partly due to high trade policy uncertainty and broader policy uncertainty,” the central bank said on Thursday.
Tariff uncertainty
Thursday’s tax rate decision came as U.S. President Donald Trump pursued an aggressive global tariff policy, with European leaders looking to increase defense spending.
Tariffs for goods imported from Europe to the United States have not been announced, but have been repeatedly threatened by Trump. It is not clear how far any such responsibility is, and the choice of negotiation may still be On the table.
European countries also want to improve their defense and security Budgetbecause of the relationship between the United States and Ukraine Sour taste. Increased defense spending could affect key economic signs such as inflation and growth.
Analysts tell CNBC these geopolitical developments May lead to more disagreements than usual In the European Central Bank’s Council, monetary policy decisions are made in the coming months.
Officials also seem to lie in what is called “neutral interest rates” (where policies are not stimulating or restrictive), and whether lies are lies and whether they need to be lower than that to induce economic expansion.
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