European Central Bank delivers expected 25-basis-point interest rate cut: Live updates – CNBC

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Markets had been pricing in an over 90% chance of a 25-basis-point cut ahead of the announcement.The ECB is grappling with balancing a re-acceleration of euro area inflation in recent months with sluggish economic growth in the region. Headline euro area inflation rose for the third consecutive month to 2.4% in December, after falling below the ECB’s 2% target several months earlier. A renewed pick-up in inflation was expected, as base effects from lower energy prices fade.Preliminary data released Thursday showed that the euro zone economy flatlined in the fourth quarter of 2024. Economists polled by Reuters had expected growth of 0.1% over the period, following a 0.4% expansion in the three months to the end of September.Following the announcement, ECB President Christine Lagarde said that the euro area economy “is set to remain weak in the near term.”Stateside, the U.S. Federal Reserve on Wednesday left interest rates unchanged, in line with expectations. Markets are overall pricing in fewer interest rate cuts from the Fed than from the ECB this year.Speaking to CNBC’s Silvia Amaro, Ben Emons, founder of Fed Watch Advisors, said that the ECB has more room to cut interest rates compared to the Fed, which he said appeared to be closer to its neutral rate.”The January Governing Council meeting falls into the ‘nothing to see here, move along’ category,” Deutsche Bank Chief Europe Economist Mark Wall said in a note on Thursday.Little has changed in the overall economic environment, he suggested, with economic recovery still facing challenges, disinflation continuing as expected and interest rates remaining restrictive.”There is really no reason to think the ECB won’t continue to cut rates, at least to a neutral level, and we think quite probably below neutral by year-end,” he said.Carsten Brzeski, global head of macro at ING, also said that the rate cutting cycle was set to continue based on Thursday’s update from the European Central Bank, but appeared more cautious about rates falling too low.”While the experience of being slow to address rising inflation will deter the ECB from adopting ultra-low rates, the desire to stay ahead of the curve remains a compelling reason to return interest rates to neutral as swiftly as possible,” he said.— Sophie KiderlinA 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 KiderlinEuropean 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 KiderlinFurther 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 KiderlinThe 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 December, after falling below the ECB’s 2% target several months earlier— Sophie KiderlinThe European Central Bank on Thursday said it was trimming interest rates by a further 25 basis points. This is the fifth rate reduction since the ECB began easing monetary policy in June of 2024. This brings the ECB’s deposit facility, its key rate, to 2.75%.— Sophie KiderlinThe euro retreated slightly against major currencies ahead of the European Central Bank decision.At 11:50 a.m. London time the euro was down 0.24% against the dollar, to $1.039.The euro was also around 0.08% lower against the British pound.Interest rate declines generally erode support for a currency.— Sophie KiderlinThe yield on bonds from euro area governments slipped as investors considered the latest growth data and looked to the European Central Bank’s interest rate announcement.GDP data for the fourth quarter of 2024 from France, Germany and the euro area overall came in weaker than expected on Thursday. Separately, the ECB is set to cut interest rates by 25 basis points later in the day.The German 10-year bund yield was last down over 5 basis points at 2.518%, while the 2-year bund yield was more than 5 basis points lower at 2.218%.France’s 10-year bond yield, meanwhile, was last trading at 3.263% after falling over 5 basis points, and the 2-year bond yield slipped more than 4 basis points to 2.404%.— Sophie Kiderlin”A cut is a done deal,” Sphia Salim, head of European rates research at BofA Global Research, told CNBC’s “Street Signs Europe” on Thursday. This means changes to the statement accompanying the announcement and the press conference that takes place after will be key, she said. “We will be watching more about any potential changes to the statement, but more importantly the press conference with in particular any comments with how the ECB looks at the recent rise in energy prices … and also how they react to the uncertainty around tariffs,” Salim noted. U.S. President Donald Trump has repeatedly threatened that he will impose tariffs on imports to the U.S. from Europe. European Central Bank President Christine Lagarde told CNBC last week that Europe must “be prepared” and anticipate any potential trade duties. She said the fact that Trump had not imposed blanket tariffs on the first day of his presidency was a “very smart approach … because blanket tariffs are not necessarily giving you the results that you expect.”As such, she said she expects Trump’s tariffs to be “more selective, focused.”— Sophie KiderlinThe euro zone economy saw zero growth in the fourth quarter, flash figures published by the European Union’s statistics agency Eurostat showed Thursday.Economists polled by Reuters had expected growth of 0.1% over the period, following a larger-than-expected 0.4% expansion in the third quarter.Read the full story here. — Holly EllyattGermany’s economy contracted by 0.2% in the fourth quarter, preliminary data from German statistics agency Destatis showed Thursday, compared with a 0.1% shrink expected by a Reuters poll.The figure is adjusted for price, calendar and seasonal variations. In the previous quarter Germany’s economy had expanded by 0.1%.Household and government consumption expenditures increased, but exports were “significantly lower” than in the previous quarter, Destatis said.”After a year marked by economic and structural challenges, the German economy thus ended 2024 in negative territory,” it added.Read the full story here.— Sophie KiderlinThe French economy contracted by 0.1% in the fourth quarter, compared with the previous three-month period, the country’s statistics agency Insee revealed Thursday.Economists polled by Reuters had expected growth to be flat.The fourth-quarter result was down from the 0.4% growth recorded in the third quarter of 2024. Read the full story here.— Holly EllyattThere 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 KiderlinThe 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 ReidGot a confidential news tip? We want to hear from you.Sign up for free newsletters and get more CNBC delivered to your inboxGet this delivered to your inbox, and more info about our products and services.© 2025 CNBC LLC. All Rights Reserved. A Division of NBCUniversal
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Source: https://www.cnbc.com/2025/01/30/european-central-bank-interest-rate-decision-january-2025.html