ECB May Cut Interest Rates for the Sixth Time

European Central Bank Expected to Cut Interest Rates for the Sixth Time to Boost Economy

The European Central Bank is expected to reduce its main interest rates today, Thursday, for the sixth time since mid-2024, as part of its efforts to support the economy in the Eurozone.

With inflationary pressures easing and economic growth slowing, experts predict the ECB will lower the benchmark deposit rate by 0.25 percentage points to 2.5%.

In its latest updates, the European Central Bank stated that inflation in the Eurozone is expected to stabilize at its medium-term target of 2% by 2025. Preliminary data from Eurostat indicated that consumer prices in the Eurozone increased by 2.4% year-on-year in February.

Inflation had risen sharply following the COVID-19 pandemic and the Ukraine crisis in 2022, leading to higher energy prices. With the ongoing decline in inflation, this shift further justifies the decision to lower interest rates.

Experts also expect the ECB to reduce interest rates further by mid-year, especially amid ongoing trade tensions with the United States, which could put additional pressure on the Eurozone’s economy, which is likely to struggle with growth this year, according to the latest forecasts.

Main interest rates directly affect borrowing costs across all sectors of the economy, and lowering them facilitates borrowing, contributing to economic activity by easing financing for home purchases or business expansion.

Sources:

• European Central Bank
• Reuters
• Bloomberg