ECB cuts key interest rate by 0.25 percentage points to 4.25 percent

die European Central Bank (ECB) It decides to reverse course and cut interest rates for the first time in almost five years. Monetary officers surround the head of the central bank Christine Lagarde As the ECB announced on Thursday in Frankfurt, it cut the key interest rate by 0.25 percentage points to 4.25 percent.

He also reduced the deposit rate charged by banks to 3.75 percent from the previous 4.00 percent for parking money at the central bank, which plays an important role in the financial market. The central bank last cut interest rates in September 2019. “The ECB Council does not commit in advance to a specific interest rate path,” the ECB explained, aiming for further study.

The US Federal Reserve Bank still has its legs

With its downward move, the ECB follows central banks in Canada, Switzerland and Sweden, which have already cut interest rates. The influential US Federal Reserve Bank Central Reserve Inflation in the U.S. has recently proved too strong to keep its feet still.

Inflation has not yet been defeated in the Eurozone either. With inflation as recently as 2.6 per cent in May, rates above ten per cent as of autumn 2022 are now a long way off. The ECB’s ten interest rate hikes from summer 2022 contributed significantly to this.

The target inflation rate is 2.0 percent

The ECB is targeting an inflation rate of 2.0 percent, which it considers the optimal level for the 20-nation bloc. ECB Chief Economist Philip Lane The central bank has recently signaled that it may loosen its tight interest rate policy somewhat. At the same time, he also clarified that lowering interest rates will not end the fight against inflation.

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In a recent survey conducted by a news agency Reuters All 82 economists surveyed expected an interest rate cut of 0.25 percentage points. However, they also expected euro watchdogs to take a cautious approach in the coming months. This will be supported by the fact that wage growth was surprisingly strong in the first quarter and inflation in services remained strong. Financial markets recently expected at most two more interest rate cuts this year.

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