ECB reduces interest again: stagnating economy needs fresh impulses!

ECB reduces interest again: stagnating economy needs fresh impulses!

Vienna, Österreich - The European Central Bank (ECB) continued its interest rate reduction strategy: On January 30, 2025, the deposit rate was reduced for the fifth time in a row from 3.00 to 2.75 percent. This decision, such as tagesschau.de , is carried out against the background of a stagnating economy in the euro area, especially in Germany, where the gross product shrank in the fourth quarter of 2024 by 0.2 percent. Church experts from the ECB, including President Christine Lagarde, see this measure as necessary in order to revitalize the economy and to stabilize inflation sustainably by the desired two percent.

Current model estimates show that the neutral interest that does not cool down or heats up the economy is between 1.75 and 2.25 percent, which the ECB tempted to reduce the key interest rate by a further 0.25 percentage points in order to reach the upper area of ​​this range - like vienna.at reported. The current interest rate reduction should also ensure that loans become more favorable for companies and private individuals, which could boost consumption and investments. The next interest conference is planned for March 5 and 6, 2025, which indicates that the ECB continues to adhere to its loosening policy.

In addition, the ECB economists pointed out that the estimates for neutral interest provides important information for monetary policy decisions, but do not represent any fixed standards for monetary policy. These uncertainties could affect ECB's responsiveness in the rapidly changing economic landscape. The economic situation remains tense and Lagarde emphasized the need to increase productivity and competitiveness in the euro zone.