The European Central Bank (ECB) has cut interest rates for the sixth time in nine months, aiming to boost eurozone economic growth. Despite facing challenges such as US tariffs and increased military spending in Europe, the bank stuck to its plan.
The ECB reduced its main interest rate to 2.5% from 2.75%, lowered its forecast for eurozone growth to 0.9% in 2025, and saw a sell-off of German government bonds spread to other markets, including the UK.
This follows Germany’s recent increase in military and infrastructure spending, which is expected to be funded by loosening fiscal rules, potentially leading to an increase in debt. The move has pushed borrowing costs up, affecting not only Germany but also the UK.
However, experts believe that despite the current challenges, the market still expects the Bank of England to make two further rate cuts in 2025, driven by encouraging inflation data. Despite these challenges ahead, the ECB aims to make new borrowing less expensive for firms and households through its interest rate cuts.
Source: https://www.bbc.com/news/articles/c30mz648nyno