Against a backdrop of global economic tension, the European Central Bank's Governing Council announced a cut of 25 basis points in its three main key rates, reducing the bank deposit rate from 2.5% to 2.25%. This is the sixth consecutive cut.
ECB President Christine Lagarde said the aim of this unanimous decision was to support the various European economies where "political uncertainties" led to weakening.
"The interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will be reduced to" 2.25%, 2.40% and 2.65%, respectively, from April 23, said a statement this afternoon.
"The eurozone economy has developed a degree of resilience in the face of global shocks, even if growth prospects have deteriorated as a result of intensifying trade tensions," the ECB said, adding, "Increased uncertainty is likely to weaken household and business confidence, while negative and volatile market reactions to trade tensions are likely to lead to tighter financing conditions."
Against this backdrop, the Governing Council, determined "to ensure a lasting stabilisation of inflation at its medium-term target of 2% and "to preserve the smooth transmission of monetary policy" will follow "a data-driven approach to determine, meeting by meeting, the appropriate" monetary policy stance, it said. Inflation currently stands at 2.2% in the eurozone and 0.8% in France,.
"While previous rate cuts were mainly the result of falling inflation, today's rate cut is primarily a reflection of the ECB's anticipation of a possible downturn in European growth," said Caroline Arnould, managing director of Cafpi, a credit broker.
The ECB's announcement comes at a time when several banks have increased their mortgage rates in April, reflecting the rise in the 10-year OAT, a French government bond, which peaked at 3.68% on March 11. It was 3.35% on April 17. Beyond Europe, Canada on Wednesday held rates steady for the first time in about a year, pausing its string of cuts as United States tariffs contribute to economic uncertainty.
"The sharp fluctuations in the 10-year OAT are prompting banks to be cautious," said Arnould, "but the market remains competitive, and some institutions are not hesitating to take advantage of their competitors' setbacks to offer attractive deals to attract borrowers. Under these conditions, the network predicts that mortgage rates should stabilize.