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2mo ago

ECB Expected to Cut Interest Rates Again as Economic Challenges Persist

The European Central Bank is anticipated to lower its key rate to 2.5% this week, with debates intensifying over the pace and extent of future reductions.

FILE - The European Central Bank is pictured in Frankfurt, Germany, Wednesday, Jan. 24, 2024. (AP Photo/Michael Probst, File)
EU flags flutter in front of European Central Bank (ECB) headquarters in Frankfurt, Germany July 18, 2024. REUTERS/Jana Rodenbusch/File Photo
A shopper pays with a ten Euro bank note at a local market in Aix-en-Provence, France, January 16, 2025. REUTERS/Manon Cruz/file Photo
Dark clouds are seen over the building of the European Central Bank (ECB) before the ECB's monetary policy meeting in Frankfurt, Germany, June 6, 2024. REUTERS/Wolfgang Rattay/File Photo

Overview

  • The European Central Bank is widely expected to cut its deposit rate by 25 basis points to 2.5% during its upcoming meeting on Thursday.
  • Eurozone inflation slowed to 2.4% in February, moving closer to the ECB's 2% target and supporting arguments for continued rate cuts.
  • Economic growth in the eurozone remains stagnant, with weak industrial performance, cautious consumer spending, and uncertainty from U.S. tariff threats contributing to the poor outlook.
  • Policymakers are divided on how far rates should be reduced, with some advocating caution due to uncertainty around the neutral rate and potential risks of overstimulating the economy.
  • The ECB is expected to revise its growth forecasts downward, reflecting ongoing economic struggles and external pressures, including geopolitical tensions and trade risks.