European Central Bank Lowers Key Interest Rates to 2.5%
The sixth rate cut since summer 2024 aims to curb inflation and support the eurozone economy, but sparks concerns about its effects on savers and future policy direction.
- The European Central Bank (ECB) reduced all three key interest rates by 0.25 percentage points, bringing the deposit rate to 2.5%.
- This marks the sixth rate cut since summer 2024, reflecting progress in reducing inflation, which stood at 2.4% in February 2025.
- The ECB's move is intended to stimulate the slowing eurozone economy by making borrowing cheaper, but it has led to lower returns for savers, with German daily savings rates dropping to their lowest levels in over a decade.
- Some ECB policymakers, including Isabel Schnabel, have suggested pausing further cuts, citing uncertainties such as U.S. trade policies and potential inflation risks.
- While short-term savings rates continue to decline, long-term fixed deposit rates have stabilized, offering slightly higher returns than shorter-term options for the first time in over a year.
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