The European Central Bank’s Governing Council said Thursday it had decided to lower three key interest rates by a quarter point. The bank cited the disinflation process in making the decision. ECB President Christine Lagarde said the rapid pace of sweeping economic and political change presents risk and uncertainty for monetary policymakers. Photo by Stephen Shaver/UPI | License Photo
The European Central Bank’s Governing Council said Thursday it had decided to lower three key interest rates by a quarter point. The bank cited the disinflation process in making the decision.
It was the sixth straight cut. European inflation had slowed to 2.4% in February. Advertisement
“The disinflation process is well on track,” the ECB said in a statement. “Inflation has continued to develop broadly as staff expected, and the latest projections closely align with the previous inflation outlook. Staff now see headline inflation averaging 2.3% in 2025, 1.9% in 2026 and 2.0% in 2027.”
ECB President Christine Lagarde said Thursday that rapid huge pace of economic and political change are impacting Europe and will be taken into account in financial and monetary planning. Part of that relates to future European support for Ukraine in its war with Russia.
“We have not been spared recent developments in the last few hours and days,” Lagarde said during a news conference in Frankfurt.
She said that has added risk and uncertainty “all over.”
She added that monetary policymakers will be both vigilant and attentive regarding planned big increases in defense spending and possible inflationary impacts of that new spending and borrowing going forward. Advertisement
She said that same spending is also expected to enhance European economic growth.
The ECB said the cuts were based upon its “updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission.”
The move brings the deposit facility rate to 2.50%, the refinancing rate to 2.65% and the marginal lending rate to 2.90%.
The ECB statement added, “The Governing Council is determined to ensure that inflation stabilizes sustainably at its 2% medium-term target. Especially in current conditions of rising uncertainty, it will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance.”
The bank said European economic growth faces continued challenges as it projected growth to be 0.9% in 2025, 1.2% for 2026 and 1.3% for 2027.
Among the challenges, the bank said, are lower exports and “ongoing weakness in investment.”
The bank said rising real incomes and gradually fading effects of past interest rate hikes “remain the key drivers underpinning the expected pick-up in demand over time.”
The bank said its monetary policy is becoming “meaningfully less restrictive.”
