ECB President Christine Lagarde. (Photo: Les Echos)

ECB President Christine Lagarde said the rate cut—the sixth since June 2024—was based on inflation trends moving steadily toward the target of 2%. 

“The disinflation process is well on track. Inflation has continued to develop broadly as staff expected, and the latest projections closely align with the previous inflation outlook. Staff now see headline inflation averaging 2.3% in 2025, 1.9% in 2026 and 2.0% in 2027,” said Lagarde.

Lagarde emphasized that sluggish economic growth in the eurozone was a key factor behind the rate cut. However, she also cautioned that this could be the ECB’s last rate reduction, as further monetary easing may have diminishing positive effects and could increase the risk of inflation rebounding. Future rate decisions will depend on market reactions and economic conditions, particularly in the context of ongoing tariff disputes.

The ECB has lowered its 2025 eurozone growth forecast to 0.9%, just slightly above the 0.7% growth recorded in 2024. This marks the fourth consecutive downward revision, signaling another challenging year ahead for the eurozone economy.