Financial News: ECB Cuts Interest Rates By 25 Bps As

ECB Cuts Interest Rates By 25 Bps As Inflation Forecasts Lowered

06/05/2025 - 15:40:00 (RTTNews)

(RTTNews) - The European Central Bank slashed its interest rates by 25 basis points on Thursday, in line with expectations, while the staff trimmed the euro area price growth projections for this year and next citing prospects of lower energy prices and a stronger euro going forward.

The Governing Council, led by ECB President Christine Lagarde, lowered the deposit facility rate by a quarter basis point to 2.0 percent. The refinancing rate was cut to 2.15 percent and the marginal lending rate to 2.40 percent.

The ECB has cut interest rates by a quarter basis points each in every rate-setting session since September.

"The Governing Council is determined to ensure that inflation stabilizes sustainably at its 2 percent medium-term target," the ECB said.

"Especially in current conditions of exceptional uncertainty, it will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance."

The ECB Staff released the latest round of macroeconomic projections for the euro area. The inflation forecast for this year and next were trimmed by 0.3 percentage points to 2.0 percent and 1.6 percent, respectively. The downward revision was attributed to lower prospects for energy prices and a stronger euro.

Core inflation that excludes energy and food is forecast to average 2.4 percent this year and 1.9 percent in 2026 and 2027, which were broadly unchanged since March.

Eurozone GDP growth was forecast to average 0.9 percent this year, 1.1 percent next year and 1.3 percent in 2027. The projection for this year was left unrevised due to stronger than expected first quarter combined with weaker prospects for the remainder of the year, the central bank said.

The ECB expects the rising state spending on defence and infrastructure, favorable financing conditions as well as increased spending due to higher real incomes and a robust labor market to make the economy more resilient to global shocks. The central bank also observed that concerns regarding the increased uncertainty due to trade tensions in April may lead to a tightening impact on financing conditions have eased.

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