Interest at four percent after a lustrum of interest rate increases.
The European Central Bank (ECB) will almost certainly cut interest rates in the euro zone on Thursday. It will be the first cut since 2019. The central bank began raising interest rates at a record pace from mid-2022 to the current record level of four percent to combat high inflation. After the last rate hike in September last year, the ECB kept borrowing costs unchanged for five times in a row.
Interest rates fell for the last time in September 2019, from minus 0.4 percent to minus 0.5 percent. In July 2022, the ECB started raising interest rates, ending an eight-year period of negative interest rates in the euro area. Economists expect that the ECB will now cut interest rates by a quarter of a percentage point to 3.75 percent. With lower borrowing costs, the ECB hopes to stimulate economic recovery in the euro area.
Although inflation in the eurozone is still above the ECB target of two percent, central bank President Christine Lagarde recently said she is confident that inflation in the eurozone is under control. Lagarde thus indicated that a first interest rate cut is likely at the meeting on Thursday.
However, it is uncertain whether interest rates will drop further in the coming months. Last week it was announced that inflation in the euro zone rose again in May to 2.6 percent. The press conference that Lagarde will hold later in the day will therefore mainly focus on hints about future interest rate steps.
