European Central Bank Cuts Interest Rates for the First Time Since 2019

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The European Central Bank lowered interest rates on Thursday for the first time in nearly five years, signaling a pivot away from its aggressive policy to stamp out a surge in inflation.

As inflation returned within sight of the bank’s 2 percent target, officials cut by a quarter-point their three key interest rates, which apply across all 20 countries that use the euro. The benchmark deposit rate was lowered to 3.75 percent from 4 percent, the highest in the bank’s 26-year history and where the rate had been set since September.

“The inflation outlook has improved markedly,” Christine Lagarde, the president of the E.C.B., said on Thursday at a news conference in Frankfurt. “It is now appropriate to moderate the degree of monetary policy restriction.”

But she did not give a strong indication of how many more times or how soon the bank might cut rates again.

There is growing evidence around the world that policymakers believe high interest rates have been effective at restraining economies to slow inflation. Now, they are lowering rates, which could provide some relief to businesses and households by making it cheaper to obtain loans.

On Wednesday, the Bank of Canada became the first Group of 7 central bank to cut rates. Central banks in Switzerland and Sweden also cut rates recently.

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