The European Central Bank (ECB) has lowered interest rates by a quarter-point, as anticipated, in a move aimed at boosting economic growth and addressing persistent inflation.
After lowering key rates again in December, the benchmark rate on deposit facility has now fallen from 3% to 2.75%, its lowest level since early 2023, News.az reports, citing foreign media.The ECB lowered borrowing costs four times last year, with four moves anticipated in 2025, according to the swaps market.
Although inflation is moving towards its 2% target, some areas of the service sector are lagging and growth remains tepid in a number of countries.
Earlier on Wednesday a flash reading on the eurozone economy showed that the currency bloc as a whole grew by 0.7% in 2024.
Declining activity in Germany, the eurozone’s largest economy, weighed on the bloc’s growth, with GDP in the country contracting by 0.2% on the quarter. This suggests Germany has now seen annual declines in activity for two consecutive years.
Spain was the only country among the big four with a positive growth rate, up 0.8% in the fourth quarter compared with the previous three-month period.
The move also contrasts with the US Federal Reserve's verdict on Wednesday night to leave rates unchanged, in the 4.25-4.50% range, after delivering 100bps of cuts over the previous three meetings.
It hinted at a lengthy pause, saying it was not in a hurry to cut again, in part because looming tariffs increased uncertainty. US president Donald Trump sharply criticised the Fed’s decision to hold rates last night.
The hold decision was accompanied by some potentially hawkish tweaks in the press release, notably removing wording that “inflation has made progress toward the 2% objective”. However, Powell later downplayed this change, also referring to the policy stance and the economy as in a “good place”.
