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ECB cuts key interest rates again: What does that mean for your money?
The ECB will cut key interest rates on March 7, 2025 to promote growth and make credit easier. Inflation and uncertainties remain relevant.
ECB cuts key interest rates again: What does that mean for your money?
At a recent meeting, the European Central Bank (ECB) decided to reduce key interest rates by 0.25 percentage points. This is the sixth rate cut since mid-2024, when the ECB switched to an easing course. The decision comes amid growing uncertainty, with the ECB stressing that monetary policy will be made less restrictive to support economic growth. At the same time, the institution must ensure that inflation in the euro zone does not rise again. The only downside: Austrian council member Robert Holzmann abstained from the vote, which indicates possible doubts about the decision.
The interest rate cut comes in response to the current economic situation, which is weighed down by the impending US punitive tariffs for the euro area. This has led to the ECB having to adjust its growth forecasts for the coming years. In particular, the determination of the monetary policy course is based on the respective data situation, which is examined from meeting to meeting Deutschlandfunk reported.
Details about the interest rate cut
With the current reduction in key interest rates, the interest rates for the deposit facility, main refinancing operations and marginal lending facility will be 2.50%, 2.65% and 2.90%, respectively, from March 12, 2025. This rate cut reflects the updated assessment of the inflation outlook and monetary policy transmission, informs the Bundesbank. Experts expect overall inflation of 2.3% for 2025, declining wage growth rates and subdued lending due to the still noticeable effects of previous interest rate hikes.
The ECB is aware that domestic inflation remains high while wages and prices adjust with a delay. Analysts have cut growth forecasts to 0.9% for 2025 and 1.2% for 2026, citing falling exports and weak investment. In order to overcome the economic challenges, it should also be noted that the Governing Council of the ECB does not pursue fixed interest rate targets and that future decisions must always be based on current economic and financial data. The aim remains to sustainably stabilize inflation at 2%.