European Central Bank warns of weak economy after delivering quarter-point rate cut
ECB did not consider a 50-basis-point rate cut, Lagarde says
A 50-basis-point reduction was not on the table for the European Central Bank’s Governing Council when making its latest interest rate decision, ECB President Christine Lagarde said Thursday.
“I can reassure you right away, we did not even utter the two numbers five, zero. So 50 was not in the debate at all,” she told CNBC’s Annette Weisbach in a press conference.
Lagarde noted that there was unanimous support from all Governing Council members for a 25-basis-point reduction.
— Sophie Kiderlin
ECB’s Lagarde says euro area economy to ‘remain weak in the near term’
European Central Bank President Christine Lagarde on Thursday said that the euro area economy “is set to remain weak in the near term.”
Her comment come after data released earlier in the day showed that euro area economic growth flatlined in the fourth quarter of 2024. Economists had been expecting 0.1% growth, after the 0.4% expansion in the previous quarter.
In the statement released by the ECB on Thursday, the central bank also pointed to ongoing headwinds for the economy.
“The economy is still facing headwinds but rising real incomes and the gradually fading effects of restrictive monetary policy should support a pick-up in demand over time,” it said.
— Sophie Kiderlin
ECB will have to cut rates more than investors are anticipating, economist says
Further interest rate cuts are likely to come from the European Central Bank, and will likely go further than investors are currently expecting, Jack Allen-Reynolds, deputy chief euro-zone economist at Capital Economics said in a note on Thursday.
“The ECB’s decision to cut its deposit rate from 3% to 2.75% today came as no surprise and the accompanying statement implies that more cuts are coming, as is widely anticipated. We think the Bank will have to lower interest rates further than most investors expect,” he said.
While the statement is similar to the last one, “the overall tone shows that policymakers are confident that inflation will soon return sustainably to the target,” Allen-Reynolds said.
He also pointed out that the central bank reiterated that policy is still “restrictive.”
“Given that policymakers no longer seem to think interest rates need to be restrictive, that’s a pretty clear signal that they expect more interest rate cuts at forthcoming meetings,” he said.
— Sophie Kiderlin
ECB says disinflation ‘is well on track’ as it leaves option for further rate cuts open
The European Central Bank on Thursday said disinflation “is well on track,” and has broadly developed in line with staff projections.
Inflation is set to return to the 2% target this year, it said in a statement as it announced its latest interest rate decision, noting that it was “determined” to ensure inflation settled at this level.
The ECB also reiterated that it would follow a data-dependent, meeting-by-meeting approach to its policy decision making and that it was not pre-committed to a certain rate path.
Headline euro area inflation rose for the third consecutive month to 2.4% in
— Sophie Kiderlin
French economy retreats in fourth quarter
Divergence between the ECB and the U.S. Fed
There will be plenty of questions for European Central Bank President Christine Lagarde in her post-announcement press conference on Thursday — including how the ECB views its divergence from the U.S. Federal Reserve, when it comes to their respective monetary policy easing cycles.
The ECB has so far cut interest rates four times, trimming by a quarter-percentage point on each occasion. The bank is set to announce its fifth trim on Thursday, with markets pricing in another three trims throughout the year.
The Fed meanwhile cut rates three times in 2024, including a bigger 50-basis-point reduction. It left rates unchanged when its meeting concluded on Wednesday, and fewer cuts are expected this year from the Fed compared to the ECB — likely just one or two.
Speaking to CNBC last week, Lagarde acknowledged the divergence, pointing to different economic environments in the euro area, compared to the U.S.
The euro area has been sluggish on the growth front, with some key economies like Germany and France in stagnation territory. The U.S. economy has meanwhile continued to grow at a solid pace.
— Sophie Kiderlin
European Central Bank expected to cut rates again with Trump threat and U.S. divergence in focus
The European Central Bank is widely expected to kick off its 2025 meetings with another interest rate cut on Thursday, as traders aim to gauge how far the central bank is willing to diverge from a stalled Federal Reserve.
Money markets on Wednesday were pricing in that the euro zone’s central bank will cut by at least a quarter-percentage point. That would take the deposit facility, its key rate, to 2.75% marking its fifth trim since it began easing monetary policy in June 2024.
Read CNBC’s full preview of Thursday’s ECB decision here.
— Jenni Reid
:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-1500845589-9354fc6166c6421f805e9c00863b992f.jpg "<div>ETFs are Booming—Here's What it Means for Your Retirement Plans</div>")
:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-2184518766-82ca48ba73184d84b51029d4907906c4.jpg "4 Surprising Ways Gen Z is Investing Differently Than Older Generations")
:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-2160884476-2ea174a5709e491daa22f3ae4e30c059.jpg "The Most Expensive Airports in the U.S. Might Surprise You")
:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-1036099056-ae3f5438b6af414dbb715ffaef0defc2.jpg "<div>Jeff Bezos' Estate Plan: What Is He Going To Do With All That Money?</div>")
:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-13175326981-f4cb8eb62ac94fb895c145fa10467850.jpg "Is Your Credit Card Secretly Offering Free Roadside Assistance? Here’s How to Find Out")
:max_bytes(150000):strip_icc():format(jpeg)/Lounging-42aa14217a5b48d18ad6cd9e38ba4d34.jpg "Your Tax Filing Could Be Free if Musk’s DOGE Commission Gets Its Way")