ECB Cuts Interest Rates for 5th Consecutive Time... Also Lowers Economic Growth Forecast

President Lagarde Signals Possible

Pause in Rate Cuts

The European Central Bank (ECB) has cut its policy rates for the fifth consecutive time. The ECB announced on the 6th (local time) after holding a monetary policy meeting in Frankfurt, Germany, that it lowered the deposit rate from 2.75% to 2.50% per annum and the base rate from 2.90% to 2.65% per annum, each by 0.25 percentage points.

The marginal lending rate was also cut from 3.15% to 2.90% per annum. Among these three policy rates, the ECB structures its monetary policy around the deposit rate. As a result, the gap between the U.S. Federal Reserve (Fed) base rate (4.25-4.50%) and the ECB deposit rate has widened to 1.75-2.00%.

The ECB downgraded its economic growth forecast for the eurozone (20 countries using the euro) this year from 1.1% to 0.9%, and for next year from 1.4% to 1.2%. The ECB explained, "This reflects the decline in exports stemming from uncertainties in a wide range of policies including trade policy, and the continued slowdown in investment for this year and next."

The ECB removed the phrase 'still restrictive' that had been used in its monetary policy materials until now, suggesting the possibility of adjusting the pace of interest rate cuts in the future. ECB President Christine Lagarde said, "Our monetary policy is becoming meaningfully less restrictive," adding, "If indicators show that a rate cut is not the most appropriate decision, then (rate cuts) will be paused."

Reporter Jong-hyun Song scream@hankyung.com