The European Central Bank (central banks in 20 countries using the euro) reduced the major deposits on Thursday by 2.75 %.
The widely expected movement was ECB’s fourth cut. This is the fifth since June, when a facility based in Frankfurt started a cycle of the current relaxation rate.
What we know about cuts
ECB implements a juggling method to reduce interest rates to make borrowing more affordable. This can promote growth, but you can also instigate inflation.
Inflation fell from a peak of 10.6 % in October 2022, but in December it rose to 2.4 %, exceeding 2 % over 2 % in the background of higher energy prices.
The euro economy has been stagnant, and Germany has ended for the second consecutive year, with the shrinking production.
The European Central Bank President Christine Lagardo said that the economy would be struggling after the stagnation at the end of 2024.
At a press conference, Lagardo said that he was “weak in the short term.” She said that monetary policy was still “restricted.”
“We are too early at this point and we are not discussing what we need to stop,” Lagardo said. “I know the direction of the trip.”
The ECB decision is in contrast to the latest movements by the US Federal Reserve, which has changed interest rates.
US monetary policy implementers say they are in a hurry to cut more, despite the stronger growth than Europe.
RC/JCG (AFP, AP)
