An IMGW News Report
The European Central Bank (ECB) took decisive action by reducing its benchmark interest rate by a quarter-point to 2.75% on Thursday, responding to inflation nearing 2% and persistently weak economic growth.
As anticipated, the ECB announced the rate cut during its January meeting this afternoon. Effective from 5th February 2025, the deposit facility rate will stand at 2.75%, the main refinancing operations rate at 2.90%, and the marginal lending facility rate at 3.15%.
The main refinancing operations rate is what banks pay when borrowing money for one week, while the deposit facility rate pertains to overnight deposits, and the marginal lending facility rate offers overnight credit to banks.
In a statement, the ECB Governing Council emphasised its commitment to stabilising inflation sustainably around its medium-term target of 2%. The Council outlined a flexible approach, stating that future interest rate decisions would hinge on economic and financial data, underlying inflation trends, and the effectiveness of monetary policy transmission.
The decision follows a period of economic stagnation across the Eurozone in Q4 2024, based on preliminary data from Eurostat. Both Germany and France, the bloc’s largest economies, reported unexpected contractions during this period. Eurozone GDP remained unchanged quarter-on-quarter, a sharp slowdown from earlier growth, with the EU showing slight improvement in annual GDP figures compared to the previous quarter.
The latest GDP figures, notably the downturns in Germany and France, reinforced expectations of the ECB’s move to cut interest rates, aiming to stimulate economic activity amidst challenging conditions.
