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The European Central Bank (ECB) is gearing up for further interest rate cuts in 2025 and 2026 as economic growth remains sluggish and inflation trends downward. Analysts anticipate a gradual easing of monetary policy aimed at keeping inflation near the ECB’s 2% target while supporting economic activity.
The ECB’s current benchmark interest rate in the Eurozone stands at 2.90%, but economic indicators suggest a steady reduction over the coming years. Market expectations indicate a series of 25-basis-point cuts, which could bring the deposit rate to approximately 2% by the end of 2025.
Economic growth in the Eurozone is expected to remain moderate, with slow recovery in key economies such as Germany. Forecasts indicate the following:
Policymakers are monitoring economic indicators, and if growth falters further, the ECB may adjust its strategy accordingly.
Inflation in the Eurozone has eased significantly, bringing it closer to the ECB’s 2% target. In December 2024, the annual inflation rate stood at 2.4%, and analysts expect it to move lower in 2025.
Should inflation fall below target, the ECB may consider more aggressive rate reductions to maintain price stability while boosting economic activity.
The ECB has emphasized a cautious and gradual policy approach in its monetary easing strategy. Banks, investors, and businesses can expect decisions based on:
A data-dependent monetary policy remains the ECB’s focus in 2025 and 2026 as it works to balance inflation control with economic support.
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