Euro Area Interest Rate

The European Central Bank (ECB) emphasized a cautious and gradual approach to cutting interest rates but signaled that more easing is likely, according to minutes from its December 11-12 meeting. Last month, the ECB cut rates for the third consecutive time, citing slowing inflation, though the timing and pace of further cuts remain uncertain. Policymakers noted that if inflation trends align with projections in the coming months, gradually reducing restrictive policies would be appropriate. With the economy barely growing, the focus has shifted from controlling inflation to addressing weak economic activity. Many policymakers now support cutting rates to levels that no longer hinder growth. The ECB is expected to cut its 3.00% deposit rate by another 25 basis points at its January 30 meeting, with further reductions likely throughout the year, potentially bringing the rate to 2% by the end of 2025—near the neutral level that neither slows nor stimulates growth.