The European Central Bank (ECB) announced on December 12, 2024, another reduction in its key interest rate. This decision marks the fourth rate cut this year, amidst an economic environment characterized by weak growth and declining inflation.
Deposit Rate at 3.0%
The deposit rate, which determines the interest banks earn for depositing funds with the ECB, was lowered by 0.25 percentage points to 3.0%. This measure aims to stimulate the European economy by encouraging banks to increase lending to businesses and consumers.
Goal: Stable Inflation at 2%
ECB President Christine Lagarde emphasized that the institution's primary objective remains stabilizing inflation at 2% over the medium term. Although inflation reached 2.3% in November, current indicators point to an economic slowdown, driven by low investment and geopolitical tensions within the Eurozone.
An Economy Under Pressure
In addition to internal challenges, external risks such as potential trade conflicts with the United States are weighing on the economic outlook. The incoming U.S. president has hinted at imposing new tariffs on European imports, which could negatively impact Eurozone exports.
Implications for Households and Businesses
For savers: The rate cut could lead to further reductions in returns on savings products.
For borrowers: On the other hand, loans are likely to become cheaper, potentially boosting consumption and investment.
The ECB has also signaled that additional rate cuts may be considered in the coming months if economic conditions warrant such action. This stance underscores the central bank's commitment to supporting the European economy during these uncertain times.
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