Instant View: ECB Cuts Rates Again, Euro Dips

ECB Reduces Rates Again, Euro Declines Amid Economic Weakness

LONDON (Reuters) - The European Central Bank cut interest rates for the fourth time this year on Thursday and kept the door open to further easing ahead, as inflation closes in on its goal and the economy remains weak.

The euro was last down 0.2% at $1.047, having traded around $1.049 before the decision. Europe's STOXX 600 share index was flat, having traded around 0.16% lower earlier.

Germany's 10-year bond yield, the benchmark for the euro zone, traded just 1 basis points (bps) higher at 2.14%. Yields move inversely to prices.

COMMENTS:

SYLVIAN BROYER, CHIEF EMEA ECONOMIST AT S&P GLOBAL RATINGS, FRANKFURT:

"Confidence remains surprisingly depressed in the euro zone, even though growth has returned, employment has never been so high and inflation is back under control."

"It’s more than an anomaly, it's a real crisis of confidence whose roots run deep and go beyond economic factors. The ECB must react and speed up the pace of rate cuts, unless low confidence derails the nascent recovery and jeopardizes the return to price stability."

"Following a cut of 25 bps this week, a commitment to cut rates further back-to-back until the deposit rate reaches neutrality is required."

ARNE PETIMEZAS, DIRECTOR RESEARCH, AFS GROUP, AMSTERDAM:

"The 25 bps cut was bang in line with expectations, and as expected the ECB drops 'restrictive' language from statement. However, no new forward guidance takes its place, except that the ECB will decide meeting by meeting.

"I had expected that the ECB would have said that it would move toward a more neutral stance. With the emphasis on more, which would allow for a bit of restriction to remain in place if necessary. Apparently, the hawks prevented a reference to a neutral stance being inserted in the statement. I think that's a disappointment, and a hawkish one at that.

"Maybe Lagarde will put a dovish spin on the 'guidance' in the presser, but I am not holding my breath."

DEAN TURNER, CHIEF EURO ZONE AND UK ECONOMIST AT UBS GLOBAL WEALTH MANAGEMENT, LONDON:

"The European Central Bank cut interest rates by 25 bps at today’s meeting, in line with both our and market expectations. In our view, a combination of fading medium-term inflation pressures and lacklustre growth points to the ECB continuing to cut rates at every meeting through to June, taking the deposit rate to 2%.

"As things stand, the risks are tilted towards the ECB having to do more, not less, to support the economy in 2025. However, this is more likely to result in further cuts later in 2025 rather than larger moves in the near term."

MARCHEL ALEXANDROVICH, ECONOMIST, SALTMARSH ECONOMICS, LONDON:

"Another 25 bps move from the ECB - its fourth rate cut in this easing cycle. The monetary policy statement repeats that the Governing Council is not pre-committing to a particular rate path."

"However, the new forecasts show core inflation at 1.9% in 2026 and 2027, which suggests that interest rates can continue to be nudged down toward the lower end of the neutral range."

MICHAEL BROWN, SENIOR RESEARCH STRATEGIST, PEPPERSTONE, LONDON:

"Accompanying the rate cut was a policy statement that featured a 'cut and paste' of the policy guidance issued after the October meeting."

"Hence, policymakers again committed to following a data-dependent and meeting-by-meeting approach to upcoming decisions, while also stressing that no pre-commitment is being made to a particular rate path."

"These projections ... though, will likely have an incredibly short shelf-life, given that they take no account of recent political tumult in France and Germany, nor do they account for the potential impacts of any trade tariffs imposed by the incoming Trump Administration early in the new year."

(Reporting by EMEA markets team; Editing by Amanda Cooper and Dhara Ranasinghe)