ECB Lowers Interest Rate Amid Inflation Forecast Adjustments

The European Central Bank (ECB) lowers interest rates as expected by 0.25 percentage points. At the same time, the inflation forecast is lowered, which opens up for further reductions.

» Published: June 05 2025

ECB Lowers Interest Rate Amid Inflation Forecast Adjustments
Photo: Arne Dedert/AP/TT

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After the cut, the most important interest rate, the deposit interest rate, lands at 2.0 percent. The decision is taken against the backdrop of uncertainty surrounding the US's tariff policy, which is estimated to slow down investments and household consumption, according to the bank.

The announcement was expected among economists, according to Bloomberg's forecast summary.

The bank does not give any forecasts about future interest rate setting, but repeats that future decisions are guided by different data that come in, such as inflation.

In updated forecasts, the ECB now predicts that inflation will land at the target of two percent this year, down from the previous estimate of 2.3 percent on average over the year.

Even for next year, the ECB writes down the inflation forecast clearly, to 1.6 percent, from the previous 1.9 percent.

This could speak in favor of more interest rate cuts. On the interest rate market, one expects at least one cut this year.

ECB President Christine Lagarde says at the subsequent press conference that inflation prospects are unusually difficult to assess. She also says that prospects for economic growth in the eurozone are at risk of being lower than the main scenario.

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By TTTranslated and adapted by Sweden Herald
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