ECB reduces the interest rate to 2.5%

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The European Central Bank has reduced its benchmark by a quarter of points to 2.5 percent as it signal about the possible slowdown in borrowing costs.

A widely expected step on Thursday – this is the sixth decline EkbLast June, the deposit, when the Central Bank began its decrease cycle when the benchmark was on a record high by 4 percent to withstand inflation.

Change the tone that signals a more elevant position, the ECB has stated that “the monetary policy is becoming much less restrictive.”

The language suggested a possible slowdown or pause in future interest rate decreases, as it compared to the previous formulation of the ECB that “the monetary policy remains restrictive.”

Christina Lagard, President of the ECB, said the shift in the wording “was not a harmless change.” Lagarde has raised the prospect of stopping speed reduction, saying that the rates would lead “data shows”.

Lagarda also stated that it was not resisting the decision to reduce the rates of the rates, the Austrian Central Bank Governor Robert Holzman, the abstain.

In the near future, the traders have rendered their rates to reduce future rates.

While they continued to the full price in one quarter point reduction this year, depending on the levels provided for by Svopi markets, the likelihood of a second reduction in 2025 decreased from approximately 85 percent to approximately 60 percent.

The euro rose against the dollar after the ECB decision, which was $ 1.085 by 0.5 percent.

“The direction of the ECB journey is no longer so clear,” Karsten Brzeska wrote to Ing in the note clients, pointing to changes in the wording.

Inflation In October 2022, he fell from peak at 10.6 percent to 2.4 percent in February, and the deposit rate is now in the lowest since February 2023.

Perspectives for EURZON Economics It is also possible to influence the walk of Friedrich Merz, the German Chancellor waiting to unleash hundreds of billions of euros when borrowing to increase the cost and overhaul of their country’s infrastructure.

Some analysts predict that the plans may double the expected German growth next year to 2 percent.

German debt, self -exempt, lost a little more soil after the ECB decision, after a sharp sale after the country’s historical proclamation. This pushed 10-year construction, gives 0.1 percentage points by 2.89 percent.

In the forecasts that did not take into account the announcement of Merza this week, the ECB reduced the growth forecast for 2025 – the sixth consistent decrease for the year – as well as for 2026 and 2027.

He now expects the euro GDP this year to increase by only 0.9 percent, compared to December projection 1.1 percent.

“High uncertainty, both at home and abroad, holds back investments, and the problems with competitiveness weigh exports,” Lagarde said on Thursday afternoon, adding that rates faced an acute uncertain situation. Last year’s growth was sluggish 0.7 percent.

But logard added that “increasing protection and infrastructure costs can also add growth,” and “can also increase inflation by exposure to the aggregate demand.”

On the eve of the ECB decision, economists Goldman Sachs wrote to customers that customers funded by Germany on much higher protection and investment in the infrastructure “clearly reduces pressure” to reduce interest rates below 2 percent.

This year, the ECB has raised an inflation forecast from 2.1 percent to 2.3 percent in December.

It adds that “most basic inflation measures” suggested that it remains on the way to reaching its 2 percent goal.

Pooja Kumra, the TD Securities strategist said that the ECB was “definitely more cautious” on future cuts when it hinted that US President Donald Trump threatened the EU tariff.

“With uncertainty around financial (politics) and tariffs, they cannot make any path,” she said.

“We believe that if inflation and growth data meet in the coming months, the ECB is likely to reduce again by 2.25 percent in April before dwelling in June, when financial and tariff impact will become clearer,” said Neil Macht, the portfolio manager at the RBC Blues Asset Management.