ECB jumps ahead of Fed, cuts interest rate by 25 bps for first time since 2019
European Central Bank cut its key interest rate Thursday by a quarter point, moving ahead of the U.S. Federal Reserve as central banks around the world lean toward lowering borrowing costs — a shift with far-reaching consequences for home buyers, savers and investors.
The ECB cut its benchmark rate to 3.75% from a record high of 4% at a meeting of the bank’s 26-member rate-setting council in Frankfurt.
The ECB said in a statement that “price pressures have weakened, and inflation expectations have declined at all horizons,” allowing it to start loosening credit.
The question now is how far and how fast the ECB, Federal Reserve and other central bankers will go in lower their benchmarks, with inflation subsiding but not yet back to levels considered best for the economy.
Analysts say the quarter-point cut on Thursday would likely not usher in a swift series of further cuts as the bank waits to make sure inflation is under control while easing credit to help the economy.
While inflation at an annual rate of 2.6% in May is well down from peak of 10.6% in October 2022, the decline has slowed in recent months and inflation even ticked up slighly from 2.4% in April. Inflation in the services sectors, a broad category that includes everything from medical care and haircuts to hotels, restaurants and concert tickets, remains elevated at 4.1%
ECB President Christine Lagarde and other officials have made it clear that a quarter-point rate cut from the current record high of 4% is more than likely when the bank's
