The European Central Bank (ECB) decided today to cut the interest rate on the deposit facility by 25 basis points to 2.75%. The main refinancing rate was adjusted to 2.90% and the marginal lending rate to 3.15%. The changes go into effect from 5 February 2025. The ECB is thus continuing its course of interest rate cuts.
Florian Heider, Scientific Director of the Leibniz Institute for Financial Market Research SAFE, comments:
“To remain capable of acting in an uncertain environment, a forward-looking, strategic approach is becoming increasingly important. As expected, the European Central Bank cut interest rates today. The markets had long priced in this move — a sign that the ECB has little room to keep rates constant, for example, in order to address the still-too-high inflation. Yet, the ECB remains confident that it will achieve its inflation target of 2% in 2025.
Given the current low real interest rates and a growing money supply, it is not clear how much more stimulus via lower policy rates is really needed. Today's decision shows that the ECB is continuing the course it communicated. But it should be careful not to obstruct its ability to react more flexibly in the future.”
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