Background and Decision-Making Basis
The European Central Bank (ECB) lowered the key interest rate by 25 basis points to 2.25% on April 17, 2025, marking the seventh rate cut within a year. This move follows a series of cuts since the summer of 2024 and marks a significant monetary policy shift aimed at stimulating the economy.
The ECB justifies its decision with a progressing disinflation process: Inflation in the Eurozone is moving closer to the target value of 2%, with both headline and core inflation decreasing recently. At the same time, trade tensions (especially U.S. tariffs) and a dampened economic forecast are weighing on the economy. The cut is intended to reduce borrowing costs, promote investment, and strengthen confidence in the stability of the Eurozone.
Impacts on Financial Markets and Consumers
For Savers
- Daily and term deposit rates continue to fall: Banks are adjusting interest rates with a delay – according to Verivox, rates fell more sharply after the March cut than they have since 2012.
- Real losses at low inflation: With inflation rates close to 2%, many accounts offer little real return.
For Borrowers
- More affordable term loans: Short-term loans (e.g., for cars or renovations) are becoming more attractive; some retailers are already offering zero percent financing.
- Pressure on mortgage rates: Long-term mortgage rates could follow as bond yields decline.
Banking Sector
- Overdraft rates decrease with a delay, making overdrafts cheaper in the medium term – refinancing into cheaper loans is recommended.
- Refinancing costs for banks are decreasing, which alleviates margin pressure.
Monetary Policy Classification and Forecasts
The ECB Council emphasizes a data-dependent strategy without a fixed interest rate path, but responds to:
- Weaker wage growth and profit developments that reduce price pressure.
- Global risks from trade conflicts that could slow exports (e.g., Swiss exporters are already suffering from U.S. tariffs of up to 31%).
Experts at Commerzbank expect further cuts down to a deposit rate of 1.75% by the end of the year, while LBBW Research has updated forecasts in the economic calendar.
Macroeconomic Risks
Despite positive inflation signals, challenges remain: Core inflation is still above the target value at 2.4%, and another appreciation of the Euro could further burden exports – a factor that the ECB is trying to cushion through loose policy.