The European Central Bank cut interest rates by 25 basis points as expected, stating that monetary policy has "clearly weakened its restrictiveness."

According to the Zhitong Finance APP, the European Central Bank (ECB) on Thursday lowered the deposit rate by 25 basis points to 2.5%, in line with market expectations. The ECB also changed the wording in its statement, stating that the "restrictiveness of monetary policy has clearly diminished."

In its statement on Thursday, the ECB said: "As the rate cuts reduce the cost of new loans for businesses and households, loan growth is recovering, and the restrictiveness of monetary policy is clearly diminishing."

This differs from the ECB's statements in January, when it still described its monetary policy stance as restrictive.

The ECB has cut rates six times in the past nine months due to sluggish economic growth in the region and growing concerns in the EU over U.S. import tariffs.

The overall inflation rate in the Eurozone remains below 3%, although it has rebounded somewhat in the last few months of 2024.

Data released earlier this week showed that the inflation rate in the Eurozone fell to 2.4% in February, down from January's level but slightly above market expectations. Core inflation and service inflation have also seen declines after remaining strong for several months.

The ECB reiterated on Thursday that progress against inflation is "going well," but noted that the inflation rate remains "high."

The bank added: "Most underlying inflation indicators suggest that the inflation rate will remain stable around the 2% target set by the Governing Council in the medium term."

Tariff Uncertainty

As the ECB announced its interest rate decision, U.S. President Donald Trump is pursuing an aggressive global tariff policy, while European leaders are looking to increase defense spending.

The U.S. has not yet announced tariffs on goods imported from Europe, but Trump has repeatedly threatened to impose tariffs. The scope of such tariffs remains unclear, and the possibility of negotiations still exists.

As relations between the U.S. and Ukraine deteriorate, European countries are also seeking to increase their defense and security budgets. Increases in defense spending could impact key economic indicators such as inflation and economic growth.

Analysts believe that these geopolitical developments may lead to divisions within the ECB's Governing Council regarding monetary policy decisions in the coming months.

ECB officials also have differing views on the position of the so-called "neutral interest rate" and whether rates need to be below the neutral rate to help stimulate economic expansion