Frankfurt, June 5, 2025 — The European Central Bank (ECB) has reduced its benchmark deposit rate by 25 basis points to 2%, a move widely expected by analysts as inflation continues to ease across the eurozone. However, the central bank also signaled that it may be nearing the end of its rate-cutting cycle, suggesting a more cautious path ahead.
This latest rate reduction is the eighth since the ECB began loosening policy in mid-2024. Over the past year, the central bank has steadily dialed back borrowing costs to support an economy strained by sluggish growth and global trade tensions.
In a post-meeting press conference, ECB President Christine Lagarde said the eurozone is approaching a turning point. “With inflation moving closer to our 2% target and some economic indicators showing early signs of stabilization, we believe the bulk of our policy support is now in place,” she stated.
Lagarde also emphasized that future rate decisions will be guided by incoming data rather than a preset course. “We are not committing to further cuts. Instead, we are maintaining flexibility and staying focused on our mandate of price stability,” she added.
The ECB’s updated economic forecasts show inflation stabilizing around 2% in 2025, with a slight decline expected in 2026. Meanwhile, economic growth remains tepid, projected at just under 1% for the coming year.
External pressures, including rising protectionism and recent tariff threats from the United States, have added to the uncertainty facing the eurozone. Nonetheless, the ECB has opted for a wait-and-see approach rather than continuing aggressive stimulus.
Markets responded cautiously to the ECB’s message, with the euro holding steady and bond yields inching slightly higher, reflecting investor expectations of a pause in further monetary easing.
As the eurozone moves forward, all eyes will be on inflation dynamics, consumer demand, and geopolitical developments. For now, the ECB appears content to hold rates at supportive levels while watching for clearer signs of economic momentum.
