The European Central Bank (ECB) lowered the deposit rate by 0.25 percentage points to 2.0 percent on June 5, 2025. This measure is part of a continued monetary easing that particularly affects savers and investors. Here are the key aspects and impacts of this decision:
Background of the Rate Cut
- Inflation Development: Inflation in the Eurozone fell to 1.9 percent in May 2025, down from 2.2 percent in April. The ECB aims for an inflation rate of two percent.
- Monetary Policy Strategy: The ECB continues its monetary easing to stimulate the economy. This is the eighth rate cut since June 2024.
Effects on Savers and Investors
- Lower Interest Rates: The reduction in the deposit rate leads to lower interest rates for savers. Daily and fixed-term deposit rates are expected to decline further, meaning savers will earn less from their investments.
- Inverse Yield Curve: Currently, there is an inverse yield curve, where shorter terms offer higher interest rates than longer ones. This may encourage investors to invest long-term to take advantage of higher rates, provided they do not have short-term liquidity needs.
Effects on Borrowers and Companies
- Cheaper Loans: The reduction of the key interest rates makes it cheaper for companies and borrowers to borrow money. This could promote investment and bolster the economy.
- Economic Outlook: The ECB hopes to revive the economy through rate cuts, which is currently weak.
Forecasts and Future Developments
- Inflation and Growth Forecasts: The ECB will adjust its forecasts for inflation and growth. These forecasts are crucial for future monetary policy decisions.
- Possible Further Rate Cuts: Although the current cut may be the last for a while, this depends on future economic developments.
Overall, the ECB’s rate cut shows both positive and negative effects on various groups. While it is intended to stimulate the economy, it also leads to lower returns for savers.