Brussels – “The disinflation process is on track,” so down with interest rates. Again. The European Central Bank Governing Council opens 2025 as it had closed 2024, that is, with a 0.25 per cent reduction in the cost of borrowing money. From February 5, the interest rate on deposits with the central bank drops to 2.75 per cent, the rate on the main refinancing operations rises to 2.90 per cent, and the interest rate on the marginal lending facility falls to 3.15 per cent.
It is true that in recent months inflation has shown signs of recovery, returning to growth; however, it is also true that “it has continued to develop broadly in line with ECB’s staff projections”, and in Frankfurt, they remain convinced that inflation “is set to return to mid-term target of 2 per cent later this year.” Dynamics that justify further easing of monetary policies adopted so far, giving oxygen to households and businesses struggling with mortgages and loans. The 25 bps rate cut decreed in early 2025 is the fifth overall by the ECB, following the four approved during 2024.
The ECB continues with the course charted by its president, Christine Lagarde. About a year ago, she announced that the
benchmark target would be met this year and hopefully well in advance. Nothing changes, not even the basic assumption that she returns to remind the press: “The Governing Council will follow a data-driven approach and decide on the appropriate stance of monetary policy from time to time.” This is to say—indeed, to reiterate—that the ECB “has not committed itself in advance to a particular path” predetermined on rates.
The commitment, if anything, is for the national governments. “Governments should implement fully and without delay the commitments made” at the European level based on common fiscal rules and national recovery plans (NRRPs), Lagarde continued. This is because the state of affairs requires it. “We had stagnation in the fourth quarter [of 2024], and growth will remain weak in the short term,” warns the ECB president. In this context, “manufacturing continues to contract, and consumer confidence is fragile.” This is where governments come in. “Despite everything, the conditions for recovery remain.” A call for reforms.
Moreover, “the Trump unknown” and the possible moves of the U.S. president remain in the background. “More friction in global trade could weigh on the euro area growth, dampening exports and weakening the global economy,” Lagarde further warns. Not only that. “Greater friction in global trade would make the outlook for inflation in the euro area more uncertain.”
The ECB remains cautiously optimistic, and with caution it moves. On this, the Eurotower chairwoman wants to be clear: the possibility of a 50 bps cut “has never been on the table,” meaning it has never been an option.
English version by the Translation Service of Withub
