Europe Central Bank jumps ahead of the Fed in lowering rates. But future cuts may be limited

abcnews.go.com:

The European Central Bank cut its key interest rate 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...

FRANKFURT, Germany — The 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.

Speaking afterward at a news conference, ECB President Christine Lagarde said inflation had eased enough for the central bank to start lowering rates.

But with annual inflation at 2.6% in May and expected to remain above the ECB 2% target into next year, Lagarde declined to indicate how fast or how deep any future rate cuts might be.

“We will keep policy rates sufficiently restrictive for as long as necessary," she said. «We are not committing to a particular rate path.”

“Are we today moving into a dialing-back phase? I wouldn’t volunteer that,» she said.

Rate increases combat inflation by making it more expensive to borrow in order to buy goods, lowering demand and taking the pressure off prices. But high rates also hold back growth, which has been in short supply in the eurozone.

With inflation coming down but taking its time to reach levels central bankers like, the question now is, how soon, how fast and how deep future rate cuts from the Fed, the ECB and others will be.

Analysts say the ECB will likely leave rates unchanged when it next