Europe reduced interest rates 0.25%

On January 30, the ECB announced the reduction of reference interest rates for 25 basic points (0.25%), about 2.75%. This is the fifth time this agency has lowered interest rates since the beginning of the currency loosening process last June.

ECB is facing double challenges, when inflation in the euro area over the past few months accelerates, while GDP growth has slower. Last month, the consumer price index (CPI) here increased in the third month in a row, to 2.4%. While a few months earlier, this figure is under 2% of the ECB target.

ECB’s interest rate -level movement is part of analysts’ forecast, when the impact from low energy prices gradually disappears.

Meanwhile, the preliminary data announced on January 30 shows that Eurozone GDP almost stood still in the fourth quarter of 2024, when an increase of 0.1% over the same period last year. In the previous quarter, this area also grew only 0.4%.

ECB Chairman Christine Lagarde said that the Eurozone economy “is still weak in the short term”. However, ECB said that “the real income still increases and the impact of the monetary tightening policy will help the demand inch up over time”.

Analysts predict ECB continues to reduce interest rates stronger than investors’ expectations. “The ECB’s decision is not surprised today. Their notice will also alludes to continue to reduce interest. We think that the reduction is stronger than the forecast of the majority of investors,” Jack Allen -Rynolds – Kinh Dynasty Study at Capital Economics commented.

Compared to the US Federal Reserve (Fed), ECB currently has more rooms reducing interest rates. On January 29, the Fed announced that the interest rate kept, after 3 consecutive decreases. Fed officials wait for the process of cooling inflation to progress. Besides, they also want to observe whether US President Donald Trump’s policies will make the outbreak come back.