European Central Bank delivers final rate cut of the year

The ECB started cutting the main interest rates in June 2024, to boost the Eurozone’s lagging economy, through lower rates to encourage borrowing, spending and investment.

The European Central Bank (ECB) has cut its deposit rate for the fourth time this year, by 25 basis points to 3%.

This is the rate for banks to make overnight deposits and also serves as the main tool for the ECB to steer the monetary policy stance.

The step was widely anticipated by the market, with further cuts on the horizon in 2025.

The ECB’s two other interest rates were lowered too, new interest rates have been set at 3.15% for main refinancing operations (for banks that borrow funds from the ECB on a weekly basis) and 3.4% for the marginal lending facility (overnight credit to banks against broad collateral).

As inflation nears the ECB’s 2% target, there is more focus on the Eurozone’s ongoing weak growth. The bloc is expected to grow 0.8% this year and 1.3% next year, according to forecasts from the European Union’s executive commission.

The ECB started cutting the main interest rates in June 2024 to boost the Eurozone’s lagging economy, through lower rates to encourage borrowing, extra spending and added investment.

After the widely anticipated cut, all eyes are on ECB President Christine Lagarde’s press conference on Thursday afternoon, as new risks have emerged since the bank’s last meeting on 17 October, including the political turmoil in the Eurozone’s two strongest economies and the results of the US election.

Investors are watching signs of what rate the ECB is eyeing to stop the cuts and also what inflation and economic projections the central bank is looking at to shape its monetary policy in 2025.