ECB Implements First Interest Rate Cut in Five Years Amid Cooling Inflation

The European Central Bank (ECB) has announced its first interest rate reduction since 2019, lowering the deposit rate by 25 basis points to 3.75%. The decision follows a steady decline in Eurozone inflation, which has moved closer to the bank’s 2% target. ECB President Christine Lagarde emphasized that while the outlook has improved, the Governing Council will remain cautious and 'data-dependent' regarding future adjustments. Some economists warn that resilient service price inflation and strong wage growth could limit the pace of further cuts. This move places the ECB ahead of the U.S. Federal Reserve, which has maintained higher rates as it seeks more definitive evidence of price stability. Global markets are closely monitoring the divergence in policy, which could impact currency valuations and international trade dynamics in the coming months.