ECB Cuts Rates, Signals Neutral Stance Shift

The European Central Bank (ECB) cut interest rates by 25 basis points, marking the fourth reduction this year, as it aims to address sluggish economic growth and stabilize inflation at the 2% target by 2025. The deposit rate now stands at 3%, and the ECB has signaled a potential shift towards a neutral policy stance by removing references to restrictive policy measures. This move, while expected, was seen as modest compared to the larger cut some economists deemed necessary due to political instability in France and the risk of a trade war with the US under President-elect Donald Trump. The ECB has emphasized a data-dependent approach for future rate decisions, indicating no commitment to a specific rate path. Meanwhile, Denmark's central bank is expected to mirror the ECB's rate cut to maintain its currency peg to the euro. The financial markets have largely anticipated these developments, with European indexes showing minimal immediate reaction.