European Central Bank (ECB), which serves as a central bank for European Union countries that use the Euro, lowered the cost of borrowing once again. During a meeting on Thursday, the ECB made a decision to cut the rates to three key interest rates by 25 basis points.
This represents the third interest rate cut in 2024, which brought the ECB’s key deposit rate to 3.25%. The central bank cut rates by 25 basis points in June, followed by another 25 basis points cut in September. The most recent cut marks the first time that the ECB lowered its borrowing rate in back-to-back meetings since 2011.
According to ECB officials, the decision to cut the rates by a further 25 basis points was prompted by “an updated assessment of the inflation outlook, the dynamics of underlying inflation, and the strength of monetary policy transmission. “
ECB’s Governing Council predicts that inflation is expected to rise in the following months before “declining to target in the course of next year.”
The major drivers behind the ECB’s decision are slow economic activity and weaker spending.
“The incoming information suggests that economic activity has been somewhat weaker than expected,” ECB president Christine Lagarde said during a press conference.
Lagarde added that she and her colleagues are not committing to any particular path when it comes to future policy decisions, while experts predict that the ECB is aiming towards a key deposit rate of 2% at some point.