The European Central Bank has cut interest rates again by 25bp and looks set to continue the current rate cut cycle.

Even without having it fully telegraphed in recent weeks, today’s ECB decision to cut policy interest rates by 25bp is no surprise. Despite somewhat stickier headline inflation, the sluggishness of the eurozone economy as well as the ECB’s strong conviction that inflation will return to target were strong arguments for today’s rate cut. The ECB's press statement was almost a verbatim copy of the December statement in the key paragraphs. So, judging from the policy statement, there are no changes to foward guidance. The ECB sticks to its meeting-by-meeting approach.

However, at 2.75%, the deposit interest rate is still restrictive – too restrictive for the eurozone economy's current weak state. The recent surge in bond yields has also worsened financial conditions in the eurozone. Even if some argue that monetary policy can do very little to solve structural issues, political instability and uncertainty in many countries will force the ECB to continue doing the heavy lifting.

Also, as long as the current inflationary pressure is anticipated to diminish over the year, the Bank is likely to overlook the present inflation resurgence. While the experience of being slow to address rising inflation will deter the ECB from adopting ultra-low rates, the desire to stay ahead of the curve remains a compelling reason to return interest rates to neutral as swiftly as possible. Let’s wait for ECB President Christine Lagarde’s comments at the press conference, starting at 2:45pm CET, but for now it looks as if the ECB’s journey to neutrality will continue and more rate cuts will follow.

Read the original analysis: The ECB cuts rates as its voyage to neutrality continues

Content disclaimer: This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more here: https://think.ing.com/content-disclaimer/

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD: Extra advances appear on the cards

AUD/USD: Extra advances appear on the cards

AUD/USD finally retested the 0.6400 region in response to the heavy selling pressure around the US Dollar, while a solid jobs report in Australia also lent extra wings to the Aussie Dollar.

AUD/USD News
EUR/USD holds steady near 1.0500 ahead of Eurozone PMI release

EUR/USD holds steady near 1.0500 ahead of Eurozone PMI release

The EUR/USD pair trades flat near 1.0500 during the late American session on Thursday. However, Trump’s tariff threats might weigh on the Euro against the Greenback. Later on Friday, the advanced HCOB Manufacturing and Services PMIs in Germany and the euro bloc will be released. 

EUR/USD News
Gold poised to challenge record highs

Gold poised to challenge record highs

Gold prices maintain their bullish stance near recent all-time highs above $2,950 per ounce troy amid the US Dollar's sell-off, shrinking US yields across the curve, and persistent tariff concerns and geopolitical woes.

Gold News
Litecoin: $500M Whale demand could revive rally as Franklin Templeton triggers sell-off

Litecoin: $500M Whale demand could revive rally as Franklin Templeton triggers sell-off

Litecoin price hit $121 on Thursday, retracting 5% from the 30-day peak of $130 recorded in the aftermath of the US SEC’s confirmation of Bitwise’s LTC ETF filing on Wednesday. 

Read more
Money market outlook 2025: Trends and dynamics in the Eurozone, US, and UK

Money market outlook 2025: Trends and dynamics in the Eurozone, US, and UK

We delve into the world of money market funds. Distinct dynamics are at play in the US, eurozone, and UK. In the US, repo rates are more attractive, and bills are expected to appreciate. It's also worth noting that the Fed might cut rates more than anticipated, similar to the UK. In the eurozone, unsecured rates remain elevated.

Read more
The Best brokers to trade EUR/USD

The Best brokers to trade EUR/USD

SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.

Read More

Majors

Cryptocurrencies

Signatures

Best Brokers of 2025