ECB’s Latest Rate Cut Aims to Bring Inflation Back to 2%

Date: June 11, 2025
Author: Reuters (Francesco Canepa, editing by Peter Graff)

📰 Summary

European Central Bank Chief Economist Philip Lane said the ECB’s recent rate cut is designed to ensure inflation returns to and stabilizes around the 2% target over the next 18 months, preventing any long-lasting deviationinvesting.com+15reuters.com+15marketscreener.com+15.

Key Points

1. Temporary Deviation Guard

Lane emphasized that the rate reduction is meant to offset a projected dip in inflation, ensuring it remains a temporary deviation, not a long-term shift below target investing.com+5in.investing.com+5ng.investing.com+5.

2. Clarifying Policy Stance

He noted that this move also clarifies the ECB’s “reaction function” — providing guidance and reducing uncertainty about future policy steps investing.com+14reuters.com+14investing.com+14.

3. Broader Policy Context

This rate cut marks the eighth decrease since June 2024, bringing the deposit rate to 2%, a level ECB considers neutral in.investing.com+14apnews.com+14investing.com+14.

ECB President Christine Lagarde suggested the tightening cycle may be nearing its end given inflation dipped just below target (1.9% in May) and global uncertainties persist thetimes.co.uk+6apnews.com+6investing.com+6.

4. Inflation & Growth Outlook

The eurozone inflation rate in May was 1.9%, slightly below the 2% markft.com+4apnews.com+4investing.com+4.

The ECB forecasts inflation stabilizing at 2% in 2025 and easing to around 1.6% in 2026investing.com+1wsj.com+1.

Implications

Monetary policy: The ECB appears to be pausing its easing cycle, signaling that further cuts will be data-dependent.

Market impact: Borrowing costs in mortgages and loans may remain low, benefiting households in countries like Ireland, where tracker mortgage rates jump with ECB moves investing.com+1wsj.com+1thesun.ie.

Growth risks: Lingering threats from U.S.–EU trade tensions and the stronger euro could weigh on inflation and growth.