European Central Bank Cuts Interest Rates Marking Sixth Cut In 9 Months

The European Central Bank on Thursday cut interest rates as expected and acknowledged that monetary policy is becoming "meaningfully less restrictive."

The Details: The Governing Council lowered its three key interest rates by 25 basis points, bringing the deposit facility rate to 2.50%, the main refinancing rate to 2.65%, and the marginal lending rate to 2.90%.

"Monetary policy is becoming meaningfully less restrictive, as the interest rate cuts are making new borrowing less expensive for firms and households and loan growth is picking up," the ECB said in a statement.

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Inflation projections show a gradual convergence towards the 2% target, with expectations of 2.1% in 2025, 1.9% in 2026, and 2% in 2027. Core inflation is also expected to approach the 2% target.

The Governing Council said it will maintain a data-dependent approach and be ready to adjust its instruments to ensure inflation stabilizes at the 2% medium-term target without committing to a specific rate path. 

Markets React: European markets declined with the STOXX 50 and the STOXX 600 falling by 0.8%, after the European Central Bank delivered the interest rate cut. 

Investors can monitor the Xtrackers MSCI Europe Hedged Equity ETF (NYSE:DBEU) and the SPDR Portfolio Europe ETF (NYSE:SPEU)  to gauge the U.S. market reaction to the cuts. 

The SPDR S&P 500 ETF Trust (NYSE:SPY), tracking the S&P 500, was down 1.11% at $576.60 and the Invesco QQQ Trust (NASDAQ:QQQ), tracking the Nasdaq 100 index, was down 1.47% at $494.64 in Thursday's premarket session. 

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