ECB Cuts Rates by 25BP, Removes Reference to Restrictiveness

17 April 2025

By Marta Vilar – MADRID (Econostream) - The European Central Bank’s Governing Council decided on Thursday to cut its three key interest rates by 25bp, as widely expected by markets and analysts.

‘The disinflation process is well on track’, the ECB said in its monetary policy statement. ‘Inflation has continued to develop as staff expected, with both headline and core inflation declining in March’.

The outlook for economic activity had weakened further in light of increasing trade tensions, according to the document.

‘Increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions’, the statement said, which did not include a past reference about monetary policy ‘becoming meaningfully less restrictive’.

With the cut, the three key ECB interest rates, effective from April 23, will be lowered to 2.25% for the deposit facility, to 2.4% for the main refinancing operations and to 2.65% for the marginal lending facility.

‘The Governing Council is not pre-committing to a particular rate path’, the press release said.

No updated macroeconomic projections were due this meeting. In March the ECB revised its forecast for headline inflation up, whereas growth was now expected to decline more than previously.

The ECB projected HICP of 2.3% in 2025,1.9% in 2026 and 2.0% in 2027, with the measure ex-energy and food at 2.2% in 2025, 2.0% in 2026 and 1.9% in 2027. Economic growth was revised downwards to 0.9% in 2025,1.2% in 2026 and 1.3% in 2027, according to the updated forecasts.