ECB Slashes Interest Rates: A Desperate Bid to Stave Off Looming Recession

European Central Bank Cuts Interest Rates for the First Time in Three Months

The European Central Bank (ECB) has reduced policy interest rates, including the base interest rate and deposit interest rate, on the 12th (local time) for the first time in three months.

According to AP and Reuters, the ECB held a monetary policy board meeting in Frankfurt, Germany, and announced that it has lowered the deposit interest rate by 0.25% from 3.75% to 3.50%. The base interest rate was reduced by 0.60% or 4.25% per annum to 3.65%, and the marginal lending rate was reduced by 0.60% or 4.50% per annum to 3.90%.

The ECB changed its monetary policy for the first time in 1 year and 11 months by reducing all three policy interest rates by 0.25% in June.

Bloomberg News explained the background to the ECB’s interest rate cut, saying, “The (European) inflation rate has fallen into the 2% range and concerns about an economic recession are growing.”

The ECB sets its monetary policy around the deposit interest rate (DFR) that commercial banks apply when they deposit short-term money with the ECB for one day.

The economic growth rate forecast for the Eurozone (20 countries that use the euro) this year was reduced from 0.9% to 0.8%, and next year’s forecast was also reduced from 1.4% to 1.3%. The consumer price inflation rate was maintained at 2.5% this year and 2.2% next year.