Key Takeaways
- The ECB cut its deposit rate by 25 basis points to 3.5%.
- Economic growth is slowing, but inflation is expected to hit 2% by 2025.
- Further rate cuts are likely, but pace will depend on new data.
The European Central Bank (ECB) has reduced its deposit rate by 25 basis points to 3.5%, citing slowing growth and moderating inflation in the eurozone. This move follows a similar cut in June, as inflation nears the ECB’s 2% target while the economy faces potential recession risks. The ECB’s decision marks the completion of a long-planned adjustment to its main refinancing rate, now at 3.65%.
ECB President Christine Lagarde emphasized that the path for future rate cuts is data-dependent, stating,
Our path… is not predetermined.
Investors are now anticipating the pace of future easing, with some expecting the next rate cut in December, depending on further economic data.
New forecasts from the ECB show slightly weaker growth for this year but still predict inflation reaching the 2% target in the latter half of 2025. Internal debate continues between policymakers, with some advocating for faster cuts to support growth, while others point to labor market strength as a reason for caution.
