Unlock Editorial Digest for Free
FT editor Roula Khalaf chooses her favorite stories in this weekly newsletter.
The European Central Bank has cut interest rates by 25 basis points to 3%, warning that economic growth will be weaker than previously forecast.
The ECB’s interest rate cut is the fourth time since June that it has lowered borrowing costs, bringing the central bank’s benchmark deposit rate to its lowest level since March 2023.
At the same time, the European Central Bank warned that the euro zone economy will grow by only 1.1% in 2025, down from the 1.3% forecast in September.
The euro was unchanged at $1.048 in live trading following a widely expected rate cut.
Investors expect the European Central Bank to cut interest rates more than the Federal Reserve next year as euro zone growth is widely expected to lag behind that of the United States.
The currency zone’s export-intensive economy is also vulnerable to President-elect Trump’s threat to impose sweeping tariffs of up to 20% on all U.S. imports.
Ahead of the rate decision, traders had been expecting the ECB to cut interest rates by a cumulative 1.5 percentage points by September next year, which would bring the deposit rate to 1.75%.
The swaps market expects the Fed to cut interest rates by about 0.75 percentage points over the same period, which would lower the target range to between 3.75% and 4%.
This is a development story
