ECB cuts rates by 25 bps, says policy 'meaningfully less restrictive'

Accordingly, the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will be decreased to 2.5 per cent, 2.65 per cent and 2.9 per cent respectively with effect from March 12.

“Monetary policy is becoming meaningfully less restrictive, as the interest rate cuts are making new borrowing less expensive for firms and households and loan growth is picking up,” the central bank said in a statement. In January, it had characterized monetary policy as ‘restrictive’.

The bank’s six rate cuts over the last nine months have come amid dull economic growth in the region.

Eurozone headline inflation remains below 3 per cent, despite picking up in the last few months of 2024. Inflation in the region eased to 2.4 per cent in February, down from January’s figure.

The central bank statement reiterated that the disinflation process is ‘well on track’, but noted that domestic inflation remains ‘high’.

ECB now foresees headline inflation averaging at 2.3 per cent this year, 1.9 per cent in 2026 and 2 per cent in 2027. The upward revision in headline inflation for 2025 reflects stronger energy price dynamics. For inflation excluding energy and food, it projects an average of 2.2 per cent in 2025, 20 per cent in 2026 and 1.9 per cent in 2027.

“Most measures of underlying inflation suggest that inflation will settle at around the governing council’s 2-per cent medium-term target on a sustained basis,” it added.

ALCHEMPro News Desk (DS)