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ECB Cuts Rates to 2.75% as Eurozone Growth Falters

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Investors Maintain Further Easing Expectations

The European Central Bank (ECB) reduced its key interest rates by 25 basis points, bringing the deposit facility rate to 2.75%. This marks the fifth rate cut since June 2024, reflecting the ECB’s ongoing efforts to address the eurozone’s economic challenges.

Recent data indicates that eurozone banks have tightened access to credit for companies, with further tightening expected in the coming months. This trend underscores the ECB’s concerns about economic growth and the effectiveness of monetary policy transmission.

ECB President Christine Lagarde has emphasized the importance of central bank independence in managing monetary policy, cautioning against political interference that could undermine efforts to control inflation.

Analysts have noted that the ECB has been relatively slow in cutting rates to support the stagnating eurozone economy. A survey indicated that 46% of economists believe the ECB has lagged behind economic necessities, while 43% feel the monetary policy is appropriate.

Looking ahead, some investors anticipate that the ECB may implement additional easing measures if economic conditions do not improve. However, ECB officials, including Bundesbank President Joachim Nagel, have advised against hastily lowering interest rates amidst persistent high inflation and uncertainty.

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