ECB Cuts Rates for Third Time to Support Weak Economy

The European Central Bank reduced interest rates for the third time this year due to a more rapid decline in inflation, enabling it to provide assistance to the region's faltering economy.

The key deposit rate was reduced by 25 basis points to 3.25%, as anticipated by all analysts in a Bloomberg survey. Officials, however, could not indicate when or how rapidly borrowing costs will be diminished from this point onward.

The European Central Bank stated, “The recent data on inflation indicates that the disinflationary process is progressing as anticipated.” The Governing Council will maintain policy rates at a sufficiently restrictive level for as long as required.

Thursday's action accelerates the removal of constraints on the euro-zone economy, which has seen its initial promise diminish. Although it appeared improbable only five weeks prior, this development followed a decline in inflation to below 2% for the first time since 2021, coupled with diminished private-sector activity and emerging vulnerabilities in the formerly robust labor market.