The European Central Bank (ECB) is cutting the key interest rate by 25 basis points. With effect from 23 April 2025, it puts the deposit facility rate at 2.25%, the main refinancing rate at 2.40% and the marginal lending rate at 2.65%.
Florian Heider, Scientific Director of the Leibniz Institute for Financial Research SAFE, comments:
"The interest rate cut is understandable given the global uncertainty. The markets have expected this step and it is right at the moment to avoid additional turbulence.
Wage growth has slowed and inflation is approaching the target as the previously persistent services inflation is also declining. However, it is unclear how geopolitical tensions, the tariff conflict and higher defense spending in Germany and the EU will affect price trends. These factors can trigger new crises, and the ECB needs to be prepared for them.
An economic downturn with possible inflation due to higher tariffs and a financial and economic crisis cannot be ruled out in view of the current uncertainty. To address this, the ECB should preserve room for future interest rate cuts."
Scientific Contact
Prof. Dr. Florian Heider
Scientific Director, Co-Director Department "Financial Intermediation"
