By Paul Hannon
Dow Jones-the European Central Bank (ECB) will probably not reduce your key interest rate, according to her chief economist Philip Lane, under 1.5 percent or in major steps. The ECB has reduced its key interest rate for the seventh time since June 2024 last month, to 2.25 percent. The next ECB council meeting will take place in the coming week and investors expect a further reduction in the key interest rate to 2 percent. In an interview with the Frankfurter Allgemeine Zeitung, Lane said that further interest rate reductions were likely if the monetary politicians see signs of a further decline in inflation, which has dropped near the target of 2 percent.
“If we see signs of falling inflation, we react with further interest rate reductions – but the discussion is not in a very broad framework: nobody talks about dramatic interest rate cuts,” said Lane.
However, the ECB would only reduce the credit costs to a certain extent to support the economy and boost inflation, unless there is a significant weakening of the economy in the Euro zone.
“Interest below 1.5 percent are clearly accommodating,” said Lane. “Going there would only be appropriate with more substantial downward risks for inflation or a significant slowdown by the economy. I don’t see that at the moment.”
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(End) Dow Jones Newswires
May 27, 2025 13:12 ET (17:12 GMT)