The European Central Bank (ECB) has reduced the interest rate from 3.25% to 3%, marking the fourth decrease this year. This decision comes as price increases in the eurozone begin to stabilize.
Last year, the ECB raised interest rates to a record high of 4% to combat soaring inflation driven by rising energy prices. Higher interest rates make borrowing more expensive, which can cool the economy and help curb price hikes.
While the average inflation rate in the eurozone has dropped to 2.4%, countries like the Netherlands still experience higher inflation at 3.8%. The reduced interest rate benefits the eurozone overall but may have less impact on nations with persistently high inflation.
ECB President Christine Lagarde noted that although the period of extremely high inflation is over, the mission is "not yet accomplished." The ECB remains cautious due to signs of economic weakening and uncertainties such as potential global trade tensions.
Economic growth forecasts have been slightly adjusted downward. The eurozone economy is expected to grow by 1.1% next year, with projections of 1.4% and 1.3% for 2026 and 2027, respectively. Inflation is anticipated to continue declining, reaching 2.1% next year—close to the ECB's target of 2%.
However, concerns persist regarding the European economy, including struggles in the manufacturing sector and increasing competition from American and Chinese products.
Source: NOS News