31st January 2025, kathmandu
The European Central Bank (ECB) has lowered its key interest rates by 25 basis points to support the struggling economy. This decision comes as part of the bank’s ongoing efforts to ease financial conditions in the Eurozone, where economic growth has remained slow.
ECB Interest Rate Cut
Following the rate cut, the ECB has adjusted its interest rates for three main facilities:
Deposit facility: 2.75%
Main refinancing operations: 2.90%
Marginal lending facility: 3.15%
These changes are expected to reduce borrowing costs for banks, businesses, and consumers, helping to stimulate economic activity.
Decision-Based on Inflation and Economic Outlook
The ECB’s decision was influenced by its updated assessment of inflation and economic conditions. The bank believes that inflation, which has been a major concern, is gradually moving towards its target of 2% over the medium term. This inflationary moderation, coupled with the effectiveness of its monetary policy, led to the decision to lower rates.
ECB’s Commitment to Inflation Control
While cutting rates, the ECB reaffirmed its commitment to controlling inflation. The bank stated that its primary goal remains to keep inflation at 2%, in line with its monetary policy objectives. Future decisions will continue to be guided by the latest data and economic evaluations.
Economic Growth Challenges Persist
Although the ECB has reduced rates to foster growth, it acknowledged that the Eurozone economy is still facing challenges. The impact of previous restrictive monetary policies is fading, but economic recovery remains fragile. Rising real incomes and easing policies are expected to help demand growth in the coming months.
Looser Monetary Policies Expected in the Future
As inflationary pressures ease, market analysts expect the ECB to adopt looser monetary policies. This rate cut is seen as the beginning of a shift towards a more accommodative approach, aimed at boosting economic activity. The ECB hopes that lower rates will encourage spending and investment.
Looking Ahead: ECB’s Focus on Stability and Growth
The ECB emphasized that it will continue to monitor economic developments and adjust its policies as needed. The bank’s focus will remain on ensuring financial stability while fostering long-term economic recovery. By supporting demand and managing inflation, the ECB aims to promote sustainable growth in the Eurozone.
