The European Central Bank (ECB) has lowered its benchmark rate by 25 basis points (bps) to 2.75%.
The Bank issued a statement explaining that the “disinflation process is well on track” as price increases are said to align with staff expectations. Similar to the US, the ECB targets a 2% rate of inflation.
The ECB said it anticipates that inflation will “settle around the target on a sustainable basis, and inflation remains elevated primarily due to high wages and prices in certain sectors. Wages are predicted to moderate.
The ECB claimed that rate cuts are making borrowing less expensive.
Earlier in the day, Eurostat released data indicating that in December 2024, the euro area unemployment rate was 6.3%, up from 6.2% in November 2024 but down from 6.5% in December 2023. Unemployment was said to have increased by 94,000 in the EU and by 96,000 in the euro area. This compares to the US at 4.1%.
In the third quarter of 2024, the EU reported that GDP had grown by just 0.4%. Gains in certain countries were offset by moribund growth in some larger markets with Germany declining by -0.2% and France by -0.1%. Ireland was reported at -1.3%. This compares to the US GDP for Q4, which was reported at 2.3% – lower than expected.