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The European Central Bank cuts interest rates for the first time in five years

2024-06-06 15:17:50, Ekonomi CNA

The European Central Bank cuts interest rates for the first time in five years

The European Central Bank (ECB) has cut interest rates for the first time in nearly five years. The bank took a U-turn on monetary policy, cutting the cost of borrowing, ahead of its US and UK counterparts.

The move came as central banks raised interest rates over the past few years to stem the biggest inflation in a generation.

The ECB cut its key deposit rate by a quarter of a percentage point to 3.75 percent after its governing council met in Frankfurt on Thursday.

The bank said that in the future it will continue to have an "approach that will depend on the progress of the data, after each meeting".

ECB President Christine Lagarde said last month she was "really confident" that eurozone inflation was under control as it slowed from a peak of over 10 percent in 2022 to near its 2 percent target.

However, data released last week showed that inflation accelerated for the first time this year to 2.6 percent in May.

This figure prompted the ECB to slightly raise its inflation forecasts for this year and next. The bank said inflation will average 2.5 percent this year, 2.2 percent next year and 1.9 percent in 2026.

Thursday's move came a day after a similar rate cut by the Bank of Canada and after earlier decisions to ease monetary policy by central banks in Brazil, Mexico, Chile, Switzerland and Sweden this year.

In contrast, the US Federal Reserve is expected to keep rates unchanged at its next meeting, as price pressures in the world's largest economy proved stronger than expected.

Interest rates are at a 25-year high, fluctuating between 5.25 and 5.5 percent.

Even for the Bank of England, analysts do not expect the bank rate to decrease from the highest 16-year level of 5.25 percent, when it meets on June 20./ Monitor.al





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