ECB Cuts Rate 25bp as Eurozone Growth Stalls
Deposit rate cut to 2.25% on weak growth.
The European Central Bank cut its deposit facility rate by 25 basis points to 2.25% on Thursday, citing deteriorating growth prospects across the eurozone. GDP expanded just 0.2% in the first quarter, the weakest quarterly performance in four periods and a significant miss from the consensus forecast of 0.5%.
President Christine Lagarde signaled that further rate reductions are likely if inflation continues to moderate toward the 2% target. Services inflation, long the stickiest component, declined to 3.1% from 3.8% in the prior quarter, providing the Governing Council with the confidence to ease. Core inflation fell to 2.6%, its lowest level since early 2022.
The euro weakened 0.4% to 1.1720 against the dollar following the announcement, while European government bond yields declined across the curve. German 10-year Bund yields fell 8 basis points to 2.18%. Bank stocks underperformed as lower rates compress net interest margins, with Deutsche Bank falling 2.1% and BNP Paribas declining 1.8%. Economists at Deutsche Bank and Barclays now forecast the deposit rate will reach 1.75% by year-end, implying two additional 25bp cuts.
More from Europe
Major UK Train Operator to Be Renationalised Within Months
The British government has confirmed that one of the country's main train operators will return to public hands within months. The move forms part of Sir Keir Starmer's phased plan to renationalise rail. Investors are reassessing the implications for rolling-stock suppliers and lease companies.
Russia and Ukraine Begin Three-Day US-Mediated Ceasefire
Russia and Ukraine have started a three-day US-mediated ceasefire announced by Donald Trump. Frontline clashes have visibly eased, even as the two sides trade accusations of violations. European capitals are pressing for the truce to be extended.
CBRT April Inflation Assessment: Annual inflation rises to 32.37 percent
The Turkish Central Bank released its April inflation assessment, showing consumer prices rose 4.18 percent month-on-month, while annual inflation climbed to 32.37 percent—up 1.50 percentage points. Energy prices surged 14.4 percent, with the underlying trend moving higher.