ECB Cut Interest Rates by 25 basis-point to 2.00%

The European Central Bank (ECB) announced Thursday an interest rate cut by 25 basis points to the interest rate of deposit facility to 2%, down from its highest level in mid-2023 of 4%.

“The decision to cut the deposit facility interest rate – the rate at which the Board directs monetary policy – is based on its updated assessment of inflation expectations, the dynamics of core inflation, and the strength of the impact of monetary policy,” the European Central Bank said in a statement.

The eurozone's inflation rate fell below the European Central Bank's target of 2% in May, recording 1.9%, a lower-than-expected level, according to preliminary data released earlier this week.

However, economic growth continued to slow even as interest rates eased. The latest estimates show that the eurozone expanded by 0.3% in the first quarter of 2025.

The central bank's decision comes at a critical time for the eurozone economy, as companies and policymakers face growing uncertainty in the wake of escalating geopolitical tensions.

According to CNBC, the European stock markets closed higher after the ECB’s decision to cut rates by 25 basis points.

“The Stoxx Europe 600 index closed up 0.9%, the U.K.’s FTSE 100 rose by 0.1% and Germany’s DAX was higher by 0.2%. Meanwhile, France’s CAC 40 was the only major benchmark to fall 0.2%,” CNBC wrote.

US President Donald Trump's tariff policy is a major concern, as tariffs are expected to significantly affect economic growth.

Certain sector-specific tariffs could severely damage Europe, where key industries such as steel and automobiles are affected.