ECB Cuts Key Interest Rate by Quarter-Point, Ahead of U.S. Fed:
The European Central Bank (ECB) lowered its key interest rate by a quarter-point on Thursday, moving ahead of the U.S. Federal Reserve as global central banks lean toward reducing borrowing costs. This shift could significantly impact home buyers, savers, and investors.
The The European Central Bank reduced its benchmark rate to 3.75% from a record high of 4% during a meeting of its 26-member rate-setting council in Frankfurt.
In a subsequent news conference, ECB President Christine Lagarde stated that easing inflation had enabled the central bank to begin lowering rates. However, with annual inflation at 2.6% in May and expected to stay above the ECB’s 2% target into next year, Lagarde refrained from specifying the pace or extent of future rate cuts.
“We will keep policy rates sufficiently restrictive for as long as necessary,” she said. “We are not committing to a particular rate path.”
When asked if the ECB was entering a phase of ‘dialling back,’ Lagarde responded, “Are we today moving into a dialing-back phase? I wouldn’t volunteer that.”
While rate increases combat inflation by making borrowing more expensive and reducing demand, they also impede growth, which has been scarce in the eurozone.
