- In a move in line with expectations, the European Central Bank announced an interest rate cut for the first time since 2019.
- On Thursday, the European Central Monetary Policy Committee decided to reduce interest rates by 25 basis points, to reach the level of 4.25%.
- The European Central Bank cut its benchmark deposit interest rate by 25 basis points to 3.75%.
- Thursday's decision is seen as the beginning of a monetary easing cycle, but continued price and wage pressures cast a shadow over the outlook and may force the euro zone central bank to wait months before cutting rates again.
- After an unprecedented series of interest rate hikes in the euro zone starting in mid-2022 to rein in runaway energy and food costs, inflation has been slowly falling towards the ECB's target of 2%.
- The ECB Governing Council said: “Based on an updated assessment of inflation expectations, core inflation dynamics and the strength of monetary policy transmission, it is now appropriate to ease the degree of tightening of monetary policy after nine months of holding interest rates steady.”
- Investors are now awaiting a keynote speech the bank European Central Bank Christine Lagarde in her press conference later today.
- The European Central Bank's reduction in interest rates would put it at the forefront of banks seeking to reduce interest rates, in a step that preceded the US Federal Reserve, as the largest central bank in the world is still in a critical situation due to the inflation rate in the United States.
- However, Lagarde said in her recent press conference that ECB officials are “relying on the data, not on the Fed’s moves.”
- On Wednesday, Canada became the first G7 country to reduce interest rates in the current session, while the central banks of Sweden and Switzerland have already announced their interest rate cuts this year.
