European Central Bank Lowers Key Interest Rate to 3.25% Amidst Falling Inflation

To stimulate the eurozone economy, the European Central Bank (ECB) has lowered its key interest rate by 0.25% to 3.25%. This decision, announced during a meeting in Ljubljana, Slovenia, marks the third rate cut by the ECB since June.

The rate cut comes as inflation across the eurozone has fallen to its lowest level in over three years, dropping to 1.8% in September, below the ECB’s target of 2%. The reduction in borrowing costs aims to support economic growth, which has been sluggish, with the eurozone economy growing by just 0.3% in the second quarter.

ECB President Christine Lagarde emphasized the need for continued economic support, stating, “The trends in the real economy and inflation support the case for lower rates.” Analysts predict the ECB may consider further rate cuts in December if the economic conditions do not improve.

We cut our key interest rates by 0.25 percentage points.

We did this because incoming data show we are well on track to reach our inflation goal.

Read today’s monetary policy decisions https://t.co/aUqG9kd0zO pic.twitter.com/qsOuo3O1Yp

— European Central Bank (@ecb) October 17, 2024

The decision to lower rates ahead of the U.S. Federal Reserve highlights the ECB’s proactive approach to addressing economic challenges. However, Lagarde cautioned that the ECB would keep policy rates “sufficiently restrictive for as long as necessary” to control inflation.

With the ECB reducing its crucial rate, banks can borrow money at a lower cost. This typically leads to lower interest rates on loans, including mortgages, making it cheaper for consumers to borrow money to buy homes.

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