ECB Announces Significant Rate Cut to Stimulate Economy

In a decisive move to counteract economic stagnation, the European Central Bank (ECB) has announced a reduction in key interest rates by 25 basis points. Effective from March 12, the rates for the deposit facility, main refinancing operations, and marginal lending facility will be adjusted to 2.50%, 2.65%, and 2.90%, respectively.

Revised Inflation and Growth Forecasts

The ECB has also updated its inflation and growth forecasts, projecting headline inflation to average 2.3% in 2025, 1.9% in 2026, and 2% in 2027. These figures indicate a stabilization around the ECB's medium-term target of 2%. However, growth forecasts have been revised downward to 0.9% for 2025, 1.2% for 2026, and 1.3% for 2027, reflecting challenges such as lower exports and weak investment. Despite these setbacks, the ECB anticipates a gradual increase in demand, driven by rising real incomes and the diminishing impact of previous rate hikes.