ECB Cuts Interest Rates 25 Basis Points to 2% Amid Inflation Easing

The European Central Bank (ECB) has cut its key interest rates, lowering the deposit facility rate to 2%, the main refinancing operations rate to 2.15%, and the marginal lending facility to 2.4%, marking the eighth rate cut since June 2024 amid declining inflation across the eurozone. Inflation fell to 1.9% in May, the first time below the ECB’s 2% target since September 2023, prompting the ECB to revise down inflation forecasts for 2025 and 2026 while maintaining its 2025 GDP growth projection at 0.9%. The ECB cited ongoing risks including trade tensions exacerbated by President Trump’s tariffs, geopolitical uncertainty, and structural challenges in Europe, but noted that increased government investment in defense and infrastructure could support growth. The rate cuts aim to reduce borrowing costs, potentially boosting investment and economic activity, and have positioned Europe as more competitive in dealmaking compared to the UK, where hesitation risks missing out on mergers and acquisitions. ECB President Christine Lagarde emphasized a data-dependent approach going forward, with suggestions from some policymakers that this may be the final rate cut for the time being. Overall, the ECB’s monetary easing reflects its strategy to stabilize prices and support modest economic growth amidst a complex global economic environment.