ECB cuts rates for first time since 2019 - but warns higher prices could return By Jessica Clark Updated: 02:48 EDT, 7 June 2024 e-mail View comments The European Central Bank (ECB) cut interest rates yesterday despite hiking inflation expectations for this year. ECB policymakers are now expected to hit the pause button before slashing borrowing costs further amid fears that domestic prices could spiral again. City analysts said there could be fewer rate cuts than previously expected this summer after the ECB hiked its inflation forecasts.
ECB President Christine Lagarde It comes ahead of a Bank of England meeting to be held later this month where policymakers will vote on whether to move rates or hold them at a 16-year high of 5.25pc. At a meeting in Frankfurt, the European Central Bank’s economists decided to lower interest rates for the first time in five years in a boost for European households.
They voted to reduce borrowing costs by 25 basis points – from 4pc to 3.75pc – despite an increase in inflation last month. But the central bank, led by president Christine Lagarde (pictured), warned price growth will stay above the 2pc target ‘well into next year’.
In a move that has dampened hopes of a further cut next month, the ECB hiked expectations for inflation this year from 2.3pc to 2.5pc, and from 2pc to 2.
2pc in 2025. Susannah Streeter, analyst at financial services company Hargreaves Lansdown, said it looks ‘unlikely’ that economists will vote for another.