Decision of the European Central Bank, June 2025

The European Central Bank announced on Thursday a drop in interest rate of 25 points and lowered its inflation expectations on the back of a higher euro and stronger energy costs.

This brought the rate of deposit facilities to 2%, down compared to the middle of 2023 by 4%. Before the announcement, traders had assessed a chance of almost 99% of the decline in a quarter according to LSEG data.

“In particular, the decision to reduce the rate of deposit facilities – the rate by which the board of directors directs the position of monetary policy – is based on its evaluation updated inflation prospects, the dynamics of underlying inflation and the strength of the transmission of monetary policy,” said the ECB in its declaration.

The pan -European Stoxx 600 Held stable after the announcement, exchanging approximately 0.3% more, while the euro increased by 0.2% compared to the dollar.

The inflation of the euro zone fell below the target rate of the BCE by 2% in May, reaching a 1.9% cooler than expected according to preliminary data published earlier this week.

On Thursday, the ECB also published its latest economic projections, claiming that it now planned inflation to an average of 2% in 2025. This is compared to a March forecast of 2.3%.

“Decreasing revisions compared to projections in March, 0.3 percentage points for 2025 and 2026, mainly reflect lower assumptions for energy prices and a stronger euro,” said the Central Bank.

Meanwhile, basic inflation was revised upwards compared to the previous estimate of 2.2%, a expectation of 2.4% this year.

Economic growth, however, continued to be dull even if interest rates are waste. The last estimate shows that in the first quarter of 2025, the euro zone developed by 0.3%.

The Central Bank’s decision comes at a critical time for the economy of the euro zone while companies and political decision -makers face increasing uncertainty in the wake of the increase in geopolitical tensions.

The pricing policy of American president Donald Trump is a main concern, the duties that should weigh heavily on economic growth. Some of the sectoral prices in particular could strike Europe hard because key industries such as steel and cars are affected.

The impact of prices on inflation is less clear and could depend on if, and how, the European Union returns, political decision -makers said. EU reprisal measures are currently on a break, but block leaders said they were ready to implement them if necessary. Question points also remain on how plans to strengthen defense expenses across Europe could have an impact on the economy.

This is a press article, please come back for updates.