Interest Rate Cuts: ECB and Fed Adapt to Evolving Economic Landscape

The European Central Bank (ECB) has lowered its interest rates again to support sluggish growth, with the US Federal Reserve likely to follow suit. Despite subsiding inflation, experts don't anticipate a rapid series of cuts. ECB President Christine Lagarde emphasizes a cautious, data-driven approach to future rate adjustments.

The European Central Bank cut interest rates again on Thursday as inflation continues to subside, aiming to boost tepid growth through lower borrowing costs for businesses and homeowners. The move sets the stage for the US Federal Reserve to potentially follow suit in the near future.

The ECB's rate-setting council lowered the deposit rate from 3.75% to 3.5% during a meeting at its headquarters in Frankfurt. This marks the second rate cut following a series of swift increases aimed at curtailing double-digit inflation triggered by Russia's reduction in natural gas supplies amid its invasion of Ukraine.

ECB President Christine Lagarde, at a subsequent news conference, refrained from committing to further rate cuts but confirmed the bank's move aligns with reaching its 2% inflation target. Analysts predict a cautious approach, with possibly only one more rate cut this year. Despite lower oil prices aiding inflation reduction, economic growth remains a concern, particularly in Germany.

(With inputs from agencies.)