ECB Cuts Rates Amid Disinflation Progress

The European Central Bank (ECB) has announced a significant reduction in its key interest rates by 25 basis points this Thursday. This adjustment sets the rates for the deposit facility, main refinancing operations, and marginal lending facility at 2.25%, 2.40%, and 2.65%, respectively. The ECB highlighted that the disinflation process is progressing as expected, with inflation anticipated to stabilize around the 2% medium-term target consistently.

Economic Growth Faces Challenges

Despite the positive inflation outlook, the ECB expressed concerns over the deteriorating growth prospects, attributing this to escalating trade tensions. "The rising uncertainty is poised to dampen confidence among both households and businesses," the ECB stated. Furthermore, the unpredictable market reactions to trade disputes are expected to tighten financing conditions.

ECB's Forward-Looking Stance

The ECB reiterated its commitment to a data-driven, meeting-by-meeting strategy for monetary policy, avoiding any pre-commitment to a specific rate trajectory. Notably, the term "restrictive" was absent from today's announcement, signaling a cautious yet adaptive approach to future policy adjustments.