European Central Bank Signals More Interest Rate Cuts in 2025

ECB policymakers project gradual rate reductions to counter weak growth and inflation, with a potential neutral rate target near 2%.

The European Central Bank (ECB) plans further interest rate cuts in 2025, following four reductions last year, to address weak economic growth and inflation challenges.
ECB President Christine Lagarde emphasized a gradual approach to rate cuts, citing confidence in reaching the 2% inflation target by year-end.
Policymakers, including Klaas Knot and Yannis Stournaras, support additional rate cuts at upcoming meetings, with markets anticipating a deposit rate of 2% by the end of 2025.
Lagarde and other officials remain cautious about external risks, such as U.S. trade policies and exchange rate fluctuations, which could impact the eurozone economy.
The ECB is focused on identifying the 'neutral rate'—estimated between 1.75% and 2.25%—to balance growth without overstimulating or restraining the economy.