As expected, the central bank cut its key rates by 25 basis points, which lowered the deposit rate to 2.75% and the refinancing rate to 2.90%. This was the fifth cut of this reduction cycle, moves that have shaved 125bp from the bank’s deposit rate.
The bank previously predicted an increase at the end of 2024 and sounded confident that the worst has passed. “Inflation has continued to develop broadly in line with the staff projections and is set to return to the governing council’s 2% medium-term target in the course of this year.”
It predicted growth ahead. “The economy is still facing headwinds, but rising real incomes and the gradually fading effects of restrictive monetary policy should support a pick-up in demand over time.”
The bank added that rate-setters “will follow a data-dependent and meeting-by-meeting approach” when it comes to monetary policy.
The Dax 40 and Stoxx 600 indexes both hit record levels after the growth data but before the ECB rate cut, with the latter again pushing back into uncharted territory following the decision to lower borrowing costs.
EUR/USD rose nearly half a cent during the ECB press conference following the rate decision, but the timing of the surge came on the heels of a report of lower-than-expected US Q4 GDP data.
It’s the economy, you know who
During a post-decision press conference, ECB President Christine Lagarde was pressed on the current state of the euro area, especially following the morning’s bad news about contractions in Germany and France. She said the economy “is set to remain weak in the near term,” but noted: “The conditions for a recovery remain in place.”
She noted that the bank’s current key rates are still too tight, a notion seconded by ING’s Carsten Brzeski: “At 2.75%, the deposit interest rate is still restrictive – too restrictive for the Eurozone economy's current weak state. The recent surge in bond yields has also worsened financial conditions in the Eurozone. Even if some argue that monetary policy can do very little to solve structural issues, political instability and uncertainty in many countries will force the ECB to continue doing the heavy lifting.”
Following the press conference, traders predicted at least three more cuts this year, with a March reduction looking increasingly like a lock after Reuters reported late Thursday that three ECB policymakers said they expect a further move down at the bank's next decision-making. Market data suggests traders anticipate the deposit rate to fall to – and possibly dip below – 2%, which is the midway point of a bracket of 1.75-2.25% for the bank’s possible “natural rate” that Lagarde suggested earlier this month.
Capital Economics predicted more even more action from the public lender: “We think that weak growth and inflation will mean that the bank has to lower interest rates further than most investors expect, with the deposit rate falling to 1.5% this year.”
Same speed ahead?
The ECB president said the disinflation process is “well on track”, but she warned that consumer price growth will likely fluctuate around the current level in the near term.
“We are confident that inflation will reach our target in ’25,” she added.
Lagarde announced that the decision to cut by 25bp was unanimous. When asked if the rate-setters considered a 50bp cut, she replied: “We did not even utter the numbers five-zero.” This, of course, is not a complete denial as a member of the governing council may have suggested “half a point” or something akin to “a larger move”.
Regardless, most analysts see more cuts coming. How many will likely depend on growth at home and could be a reaction to activities abroad: When asked about possible US tariffs on EU goods, Lagarde noted that any such policies would have a complicated economic effect on the euro area while having a “negative global impact”. She said one would have to wait for concrete actions before deciding on policy.
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data_array.from_react = data.from_react;
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postMessage({action: 'PublisherChannelJoined' });
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function session_static_info(msg) {
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postMessage(data);
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session_info.browser_version = data.browser_version;
session_info.cookies_enabled = data.cookies_enabled;
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session_info.connection_protocol = data.protocol;
session_info.delay_target = data.delay_target;
session_info.session_email = data.session_email;
session_info.remote_ip = data.remote_ip;
session_info.php_session_id = data.php_session_id;
session_info.application_name = data.application_name;
session_info.http_referrer = data.http_referrer;
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function start_log() {
var session_start_date = new Date();
session_start_time = session_start_date.getTime();
var months = ['Jan','Feb','Mar','Apr','May','Jun','Jul','Aug','Sep','Oct','Nov','Dec'];
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data_array.username = session_info.session_email;
data_array.php_session_id = session_info.php_session_id;
data_array.webrtc_protocol = '';
data_array.session_start_time = (session_start_time/1000).toFixed(0);
data_array.stream_name = session_info.stream;
data_array.session_start_date = session_start_date_string;
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function update_session_info(data) {
var data_array = {};
var msg_string = '';
var current_date = new Date();
var current_time = current_date.getTime();
session_info.protocol = data.protocol;
session_info.curr_delay = (data.effective_latency / 1000).toFixed(2);
session_info.session_length = current_time - session_start_time;
session_info.ping_time = data.ping_time;
session_info.jitter = data.jitter;
session_info.packet_loss = data.packet_loss;
session_info.effective_latency = data.effective_latency;
session_info.mean_opinion_score = data.mean_opinion_score;
session_info.restarts = data.restarts;
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data_array.effective_latency = session_info.effective_latency;
data_array.mean_opinion_score = session_info.mean_opinion_score;
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data_array.type = 'webrtc_log_data';
data_array.session_id = session_info.session_id;
data_array.php_session_id = session_info.php_session_id;
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data_array.restarts = session_info.restarts;
data_array.threshold = 0;
data_array.curr_delay = session_info.curr_delay;
data_array.session_length = session_info.session_length;
data_array.date = current_time;
data_array.webrtc_protocol = session_info.protocol;
data_array.ping_time = session_info.ping_time;
data_array.jitter = session_info.jitter;
data_array.packet_loss = session_info.packet_loss;
data_array.effective_latency = session_info.effective_latency;
data_array.mean_opinion_score = session_info.mean_opinion_score;
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- Bank says inflation headed toward target
- Traders expect three more cuts this year
- Analysts suggest loosening could accelerate
By Eric Culp
European Editor, LiveSquawk News
@eculp.bsky.social
@EricCulpLS
30 January 2025 | 15:40 GMT
FRANKFURT – The European Central Bank lowered its key interest rates Thursday just hours after preliminary data showed zero growth in the currency area last quarter.
As expected, the central bank cut its key rates by 25 basis points, which lowered the deposit rate to 2.75% and the refinancing rate to 2.90%. This was the fifth cut of this reduction cycle, moves that have shaved 125bp from the bank’s deposit rate.
This week’s move came despite a third straight rise in Eurozone headline annual consumer price growth last month, which climbed to 2.4%.
The bank previously predicted an increase at the end of 2024 and sounded confident that the worst has passed. “Inflation has continued to develop broadly in line with the staff projections and is set to return to the governing council’s 2% medium-term target in the course of this year.”
It predicted growth ahead. “The economy is still facing headwinds, but rising real incomes and the gradually fading effects of restrictive monetary policy should support a pick-up in demand over time.”
The bank added that rate-setters “will follow a data-dependent and meeting-by-meeting approach” when it comes to monetary policy.
The Dax 40 and Stoxx 600 indexes both hit record levels after the growth data but before the ECB rate cut, with the latter again pushing back into uncharted territory following the decision to lower borrowing costs.
EUR/USD rose nearly half a cent during the ECB press conference following the rate decision, but the timing of the surge came on the heels of a report of lower-than-expected US Q4 GDP data.
It’s the economy, you know who
During a post-decision press conference, ECB President Christine Lagarde was pressed on the current state of the euro area, especially following the morning’s bad news about contractions in Germany and France. She said the economy “is set to remain weak in the near term,” but noted: “The conditions for a recovery remain in place.”
She noted that the bank’s current key rates are still too tight, a notion seconded by ING’s Carsten Brzeski: “At 2.75%, the deposit interest rate is still restrictive – too restrictive for the Eurozone economy's current weak state. The recent surge in bond yields has also worsened financial conditions in the Eurozone. Even if some argue that monetary policy can do very little to solve structural issues, political instability and uncertainty in many countries will force the ECB to continue doing the heavy lifting.”
Following the press conference, traders predicted at least three more cuts this year, with a March reduction looking increasingly like a lock after Reuters reported late Thursday that three ECB policymakers said they expect a further move down at the bank's next decision-making. Market data suggests traders anticipate the deposit rate to fall to – and possibly dip below – 2%, which is the midway point of a bracket of 1.75-2.25% for the bank’s possible “natural rate” that Lagarde suggested earlier this month.
Capital Economics predicted more even more action from the public lender: “We think that weak growth and inflation will mean that the bank has to lower interest rates further than most investors expect, with the deposit rate falling to 1.5% this year.”
Same speed ahead?
The ECB president said the disinflation process is “well on track”, but she warned that consumer price growth will likely fluctuate around the current level in the near term.
“We are confident that inflation will reach our target in ’25,” she added.
Lagarde announced that the decision to cut by 25bp was unanimous. When asked if the rate-setters considered a 50bp cut, she replied: “We did not even utter the numbers five-zero.” This, of course, is not a complete denial as a member of the governing council may have suggested “half a point” or something akin to “a larger move”.
Regardless, most analysts see more cuts coming. How many will likely depend on growth at home and could be a reaction to activities abroad: When asked about possible US tariffs on EU goods, Lagarde noted that any such policies would have a complicated economic effect on the euro area while having a “negative global impact”. She said one would have to wait for concrete actions before deciding on policy.
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