The European Central Bank meets expectations and lowers interest rates

The European Central Bank meets expectations and lowers interest rates

He European Central Bank (ECB) is detached from the Federal Reserve (the US bank regulator) and opt for lower interest rates 0.25%up to 2.75%. Which causes the paths of the two central banks of the West to separate and expand the interest rates gap between the United States and Europe.

Specifically, the Deposit rate (DFF) will remain at 2.75%the reference for its main refinancing operations (MRO), in 2.90%; and that of loan ease (MLF), at 3.15%.

As explained by the ECB in the press release issued this afternoon, “the disinflation process continues to advance and continues to show an evolution in general according to the projections of the experts.” Their projections, in fact, indicate that In the medium term, inflation will be in the target figure of 2%. According to the latest data available, the inflation rate of the euro zone was in December at 2.4%

The decision of the ECB was expected by analysts. Now that inflation is practically controlled, its focus is on growth: this morning the data of the Growth Growth Growth (GDP) of the euro zonethat It has stopped completely in the fourth quarter of 2024. In the European Union as a whole, economic activity in the fourth quarter of the year expanded at a rate of 0.1% compared to the third quarter, when 0.4% had increased. Thus, compared to the fourth quarter of 2023, the interannual growth of the GDP of the euro zone was 0.9%, while in the EU it was 1.1%.

The impact on pocket

The decision of the ECB to lower interest rates, although it seems distant, affects, and much, to the pockets, since It has a direct impact on the price of credit(and therefore in mortgages) and in bank deposits.

When the ECB decides to lower the types, the price of credit descends. Financial entities adapt their offers and this derives in the fact that mortgages are cheaper after a few weeks. The decision is especially relevant in a month in which the Euribor (the reference interest rate for mortgage loans in Europe) has risen up to 2.53%, thus breaking a 15 -month decline streak.

What happened in the United States?

The Fed decided yesterday Maintain interest rates without changes at the level between 4.25% and 4.5%. The American Central Bank was moving away from Donald Trump’s threats, which has made it clear that his intention is to influence this body – which is independent of the White House. Last Thursday, Trump said he wants interest rates to “go down a lot”, but this time, the Fed has ignored.

The statements of the president of the United States have echoed in Europe. In fact, the president of the ECB, Christine Lagarde, reminded her of the need for independence of these institutions.