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The European Central Bank cut interest rates by a quarter of a percentage point to 3 percent, while softening its hawkish tone and warning that growth would be weaker than it had previously expected.
The ECB's cut – the fourth cut in borrowing costs since June – takes the central bank's key deposit rate to its lowest level since March 2023.
This came at a time when the European Central Bank warned that… Eurozone economy It is expected to grow just 1.1 percent in 2025, down from its September estimate of 1.3 percent.
The European Central Bank has abandoned its commitment to “keep interest rates sufficiently tight for as long as necessary” to bring inflation down in line with its 2 percent target. He instead stressed that “the effects of restrictive monetary policy” will “gradually fade” over time.
The euro was unchanged at $1.048 in immediate trading after the widely expected reduction.
Investors expect that European Central Bank The Federal Reserve will cut interest rates more than the US Federal Reserve next year, as growth in the euro zone is widely expected to lag behind that of the US.
The currency zone's heavily export-dependent economy is also vulnerable to President-elect Donald Trump's threat to impose sweeping tariffs of up to 20 percent on all US imports.
Traders expect the European Central Bank to make further cuts by a quarter of a percentage point by next September, which will raise the interest rate on deposits to 1.75 percent. Expectations did not change after Thursday's decision.
Swaps markets are pricing in cuts of about 0.75 percentage points from the US Federal Reserve over the same time period, which would lower the target range to between 3.75 and 4 percent.
Earlier in the day, the Swiss National Bank halved its key interest rate to 0.5 percent, a larger cut than expected.
This is a developing story
