(CPV) - On December 12, the European Central Bank (ECB) decided to cut interest rates by 0.25% and continue to leave open the possibility of further easing in 2025 to support the economy struggling due to geopolitical instability in the region and the risk of a new trade war with the US.
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| ECB President Christine Lagard. (Photo: Reuters) |
This is the third consecutive interest rate cut and the fourth by the ECB since the agency started its easing cycle in June this year.
With this adjustment, the ECB's deposit rate, main refinancing operation and lending rate margins are now set at 3%, 3.15% and 3.4% respectively.
Explaining the decision to cut interest rates, the ECB said: "The deflationary trend in the region remains intact", despite the fact that the pace of price increases has accelerated in recent months.
The ECB had previously cut its inflation forecast to 2.4% in 2024 and 2.1% in 2025. Recent signs that inflation is now on a steeper decline have bolstered policymakers' confidence in further rate cuts. The ECB Governing Council, headed by President Christine Lagarde, has had to balance concerns about the growth outlook with ensuring that inflation reaches and stays at the ECB's 2% target.
In addition, the decision to cut interest rates also aims to support growth in the context of the regional economy not being able to break through after the COVID-19 pandemic and the energy crisis after the Russia-Ukraine conflict broke out.
In a statement on the same day, the ECB stressed that it was rapidly easing fiscal policy this year as concerns about inflation appeared to have passed and now was the time to discuss how to calculate the pace of interest rate cuts quickly enough to support a sluggish economy that is lagging behind its global counterparts.
ECB President Christine Lagard said that due to concerns about the deteriorating economic situation, some rate-setting members proposed a 0.5% cut, but in the end all members agreed on a 0.25% cut.
The ECB is set to start cutting interest rates in June 2024 to boost the slowing eurozone economy.
The ECB's dovish shift comes as Germany, Europe's main growth engine, is grappling with weak growth and the risk of a new global trade war after US President-elect Donald Trump returns to the White House.
Given the uncertain economic situation, the ECB is cautious about the path of interest rate adjustments in the coming time. The central bank said it will rely on the latest economic data to make decisions at each meeting, instead of making a specific commitment to cut interest rates in the future./.
Source: https://dangcongsan.vn/the-gioi/tin-tuc/ecb-cat-giam-lai-suat-lan-thu-4-trong-nam-2024-686611.html
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