European Central Bank lowers rates by 25 basis points, in line with forecasts
Benchmark deposit rate cut to 2%, its lowest since January 2023, as bank says inflation to stay around its 2% target
Abdulselam Durdak - Anadolu Agency )
ISTANBUL
The European Central Bank (ECB) on Thursday slashed its three key interest rates by 25 basis points, meeting market estimates.
The key deposit rate now stands at 2%, its lowest level since January 2023.
The interest rates on the main refinancing operations and the marginal lending facility were also cut to 2.15% and 2.40%, respectively.
This marked the eighth rate cut since the ECB initiated its easing cycle in June 2024.
The bank stated that the inflation is currently at around the Governing Council’s 2% medium-term target.
"In the baseline of the new Eurosystem staff projections, headline inflation is set to average 2.0% in 2025, 1.6% in 2026, and 2.0% in 2027," the central bank said in a statement.
The bank stressed that it expects the gross domestic product (GDP) in the euro area to rise by 0.9% in 2025, 1.1% in 2026, and 1.3% in 2027.
"While the uncertainty surrounding trade policies is expected to weigh on business investment and exports, especially in the short term, rising government investment in defense and infrastructure will increasingly support growth over the medium term," it noted.
The ECB noted that it assessed different scenarios regarding the high uncertainty in global trade and the economy.
"A further escalation of trade tensions over the coming months would result in growth and inflation being below the baseline projections. By contrast, if trade tensions were resolved with a benign outcome, growth and, to a lesser extent, inflation would be higher than in the baseline projections," it stressed.
Additionally, the ECB stated that the majority of underlying inflation metrics point to a sustained inflation rate of about the Governing Council's medium-term target of 2%.
The rate cut followed the better-than-expected easing in the euro area's annual inflation in May. The rate eased to 1.9%, lower than the ECB's 2% target.
It also came after the renewed trade tensions and negotiations between the US and the EU.
US President Donald Trump had threatened to impose a direct 50% tariff on the EU starting on June 1 by saying trade talks were "going nowhere" after suspending the previously imposed 20% tariff.
After speaking with the EU Commission President Ursula von der Leyen, the US president subsequently moved the date to July 9.
Trade talks between the two parties are ongoing as the EU Trade Commissioner Maros Sefcovic and the US Trade representative met in Paris on Wednesday.
