Eurozone cuts interest rate for first time in 5 years

The EU has become the second major global economy to cut its lending rate this week, saying it had made progress in tackling inflation, the BBC reports.

The European Central Bank (ECB) announced a cut in its main interest rate from an all-time high of 4% to 3.75%.

That follows Canada’s decision on Wednesday to cut its official lending rate.

The ECB’s move comes as voters head to the polls for EU-wide elections over the next four days, with the outcome expected to reflect people’s unhappiness over cost-of-living pressures.

Christine Lagarde, president of the ECB said the outlook for inflation had improved “markedly”, paving the way for the rate cut.

However, she warned that inflation was likely to remain above the bank’s 2% target “well into next year”, averaging 2.5% in 2024 and 2.2% in 2025.

The ECB would keep interest rate policy “sufficiently restrictive for as long as necessary” to bring inflation down to the Bank’s 2% target, she said.

However, she added: “We are not pre-committing to a particular rate path.”

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