European Central Bank lowers deposit rate amid economic uncertainty
Date
12/16/2024 7:36:59 AM
(MENAFN) The European Central Bank (ECB), which oversees monetary policy for the 20 euro-using nations, reduced its key deposit rate by 0.25 percentage points to 3 percent on Thursday.
This widely anticipated decision marks the ECB’s third consecutive rate cut and the fourth since June, when the bank began its current cycle of easing interest rates.
After aggressively raising borrowing costs from mid-2022 to combat surging energy and food prices driven by Russia's war in Ukraine, ECB policymakers have shifted focus toward rate reductions. Falling inflation has facilitated these cuts, but weakening economic prospects in the eurozone have also made them increasingly necessary to stimulate investment.
Speculation had grown that the ECB might implement a more substantial 0.5 percentage point cut following worse-than-expected economic data and a surprise rate reduction by Switzerland’s central bank earlier on Thursday.
Despite this, the ECB chose to proceed cautiously with another 0.25 percentage point cut, citing concerns over lingering inflation risks. Although inflation had declined earlier in the year, it climbed back above the ECB’s 2 percent target in November, prompting continued vigilance.
This measured approach underscores the ECB’s balancing act between supporting a faltering eurozone economy and maintaining its commitment to price stability.
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