The European Central Bank (ECB) is set to cut interest rates by 25 basis points on Thursday, lowering the deposit facility rate from 2.25% to 2%.
This would be the seventh consecutive cut and the eighth since the easing cycle began in June last year. The move aims to normalize interest rates after the sharp increases seen during 2022-2023.
Lower interest rates reduce borrowing costs for families and businesses across the Eurozone, which comprises 20 countries using the euro.
Cheaper loans encourage spending and investment, supporting economic growth. The ECB independently sets these rates to control inflation, its primary mandate.
Inflation in the Eurozone has fallen significantly, reaching 1.9% in May — below the ECB’s 2% target and the lowest since September. This decline is a key reason behind the expected rate cut. Economists believe inflation will continue to stay below target this year, allowing the ECB to ease monetary policy further.
The upcoming rate cut reflects the improved inflation outlook and the ECB’s intention to support the economy amid ongoing uncertainties, including trade tensions and geopolitical risks.
The ECB’s deposit rate at 2% would be the lowest in over two years. Some ECB officials have indicated that policy normalization is not yet complete, suggesting more cuts could follow depending on economic conditions.
The rate decision will be announced at 12:15 GMT, followed by a press conference with ECB President Christine Lagarde at 12:45 GMT. Markets will closely watch for guidance on future rate moves, as the ECB balances between dovish views favoring further cuts and hawkish concerns about economic risks.
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