Given the gloomy economic outlook and declining concerns about inflation, the ECB is cutting interest rates for the fourth time this year. The monetary authorities decided on Thursday in Frankfurt to lower the deposit interest rate at which financial institutions can park excess money at the central bank by a quarter of a percentage point from 3.25 to 3.00 percent.
The interest rate at which commercial banks can obtain fresh money from the ECB will fall from 3.40 to 3.15 percent. The deposit rate is now considered the key interest rate for the eurozone. With its decision, the central bank maintains its approach of cautious, small downward interest rate steps.
Easing measures are intended to curb inflation
The euro watchdogs led by central bank chief Christine Lagarde initiated the interest rate turnaround in June and then took further easing measures in September and October. Regarding the way forward next year, the European Central Bank (ECB) said that the ECB Governing Council was determined to ensure a lasting stabilization of inflation at the medium-term target of two percent.
Determining the appropriate monetary policy stance will depend on the data situation and will be decided on a meeting-by-meeting basis. The next interest rate meeting of the monetary authorities is scheduled for January 30.
Concerns about economic data
The ECB is currently operating in an increasingly uncertain situation. According to monetary authorities, inflation is on track to reach the central bank’s target of 2.0 percent next year. In November, inflation in the community of twenty countries stood at 2.3 percent, a far cry from the figures of more than ten percent seen in autumn 2022. But the recent, rather weak economic data from the eurozone is increasingly worrying concerns at the ECB. Council .
Moreover, political uncertainties have increased due to the government crises in Germany and France, the two largest economies in the euro area. Moreover, there is a threat of new tariffs during the second term of newly elected US President Donald Trump, which would cause trade conflicts and put additional pressure on the eurozone economy. Deutsche Bundesbank President Joachim Nagel had warned that if the tariff plans were implemented, it could cost one percent of Germany’s economic output.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
