Latest news with #RubenSegura-Cayuela
Euronews
06-03-2025
- Business
- Euronews
ECB cuts rates for sixth time since June despite sticky inflation
The ECB reduced its interest rates on Thursday afternoon during its March meeting, as analysts had anticipated. The interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will be decreased to 2.50%, 2.65% and 2.90% respectively, with effect from 12 March 2025. The interest rate on the main refinancing operations is the rate banks pay when they borrow money from the ECB for one week, while the rate on the deposit facility is what banks can use to make overnight deposits with the Eurosystem. The rate on the marginal lending facility, meanwhile, offers overnight credit to banks from the Eurosystem. QUOTE, the ECB said in a statement. Bank of America economist Ruben Segura-Cayuela had earlier described Thursday's decision as the "last easy rate cut". Stubborn inflation The decision comes after inflation cooled to 2.4% in the eurozone in February, higher than the forecasted 2.3%. While price pressures are nearing the ECB's 2% target, the total was predominantly driven up by services inflation - which came to 3.7% year-on-year. On a monthly basis, consumer prices also rose 0.5% from January, the steepest increase seen since April 2024. Looking ahead, the prospect of a trade war with the US raises the chance that these totals could rise. US President Donald Trump is threatening a 25% tariff on EU imports and the bloc has warned it would retaliate with its own levies. Another factor complicating the eurozone's economic future is Russia's war in Ukraine. With the new US administration pulling back military support for the EU, member states must raise their own military budgets, pushing up spending and debt levels. Stuttering growth While managing these risks, policymakers are also conscious of lacklustre growth across the eurozone. In the final quarter of 2024, seasonally adjusted GDP increased by 0.1% quarter-on-quarter in the eurozone and by 0.2% in the EU, according to Eurostat. 'The euro-zone economy performed a little better than previously thought in Q4, but growth was still extremely weak and the early signs are that it got off to a slow start to 2025,' Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics, said. 'The key point is that a 0.1% expansion is hardly something to get excited about,' he added. Across the Atlantic, the Federal Reserve will be making its next monetary policy decision on 19 March. It's forecasted that US interest rates will be cut two or three times in 2025, although these moves may come later in the year.
Euronews
03-03-2025
- Business
- Euronews
Eurozone inflation falls less than expected: ECB rate cuts at risk?
After four consecutive months of rising inflation, eurozone consumer prices edged lower in February but fell less than economists had predicted, underscoring persistent price pressures that could complicate the ECB's rate-cut plans for 2025. The eurozone's annual inflation rate eased to 2.4% in February 2025, down from 2.5% in January, according to flash estimates from Eurostat. However, this was higher than the forecasted 2.3%, highlighting the challenges of returning to the ECB's 2% target. On a monthly basis, price pressures soared, with consumer prices rising 0.5% from January - the steepest increase since April 2024. Services inflation remained the highest among categories, totalling 3.7% year-on-year, slightly down from January's 3.9%. Food, alcohol, and tobacco inflation accelerated from 2.3% to 2.7%, while core inflation, which excludes energy and services, eased only slightly from 2.7% to 2.6%. Among eurozone nations, Estonia recorded the highest annual inflation rate at 5%, followed by Croatia (4.7%) and Belgium (4.4%). On a monthly basis, Belgium stood out with a 2.4% surge, the steepest in a year. ECB outlook: Rate cut path uncertain The ECB is widely expected to cut rates by 25 basis points at its 6 March meeting, with Bank of America economist Ruben Segura-Cayuela describing it as the 'last easy cut'. Yet, beyond March, divisions among ECB policymakers could emerge, making the pace of further easing uncertain. BNP Paribas economist Stéphane Colliac noted that services inflation remains elevated across the eurozone, including in France. He also warned that energy inflation could briefly tick up in the short-term, but this is unlikely to be sustained. 'From now until the summer, energy prices and those for food and industrial goods are likely to put upward pressure on inflation, but a fall in services inflation, even limited, would allow core Eurozone inflation to fall in the spring and headline inflation to stabilise at around the 2% target,' Colliac said. BNP Paribas expects the ECB to deliver three consecutive quarter-point rate cuts, yet the bank warned that persistent core inflation close to 3% may slow the pace of future cuts. Market reaction: Euro and defence stocks rally The euro strengthened 0.6% to 1.0465 against the dollar by mid-morning Monday, extending session gains after the inflation data. The single currency also found support from a weekend summit in London, where European leaders agreed on a coordinated plan to boost defence spending and sustain aid to Ukraine. European bond yields rose as markets digested the combined impact of persistent inflation and increased government spending expectations. German two-year Schatz yields climbed 5 basis points to 2.05%, while 10-year Bund yields rose 6 basis points to 2.45%. In equity markets, the Euro STOXX 50 index gained 0.6%, while Germany's DAX advanced 0.8%. Defence stocks led the rally, with Rheinmetall surging 17.6%, France's Dassault Aviation and Thales up 16%, and Italy's Leonardo rising 15% after European leaders pledged to boost military spending. In Germany, reports suggested that the CDU/CSU and SPD, currently in coalition negotiations, are considering two special funds worth hundreds of billions of euros for defence and infrastructure investments. This added further momentum to defence stocks and bond yields.
