The European Central Bank (ECB) cut the 3 key interest rates today for the first time in 5 years. The ECB lowered its key interest rates by 25 basis points, bringing the main refinancing rate down to 4.25%.

This marks the first interest rate cut since March 2016 for the main refinancing operations rate and the marginal lending rate, while the deposit rate has seen its first reduction since September 2019.

This brings the central bank’s key rate to 3.75%, down from a record 4% where it has been since September 2023.

The decision comes after a period of heightened inflation concerns. However, recent data suggests inflation is on the decline, with the ECB citing "weakening price pressures" and "declining inflation expectations" as key factors in their decision to ease monetary policy.

The rate cut is intended to make borrowing cheaper for businesses and consumers. This could lead to increased investment and spending, ultimately stimulating economic activity in the Eurozone.

ECB President Christine Lagarde acknowledged ongoing concerns about inflation but emphasized the ECB's commitment to maintaining price stability. She indicated that the future path of interest rates will be "data-dependent," suggesting further cuts could be possible if economic conditions warrant them.