The European Central Bank lowered its key deposit rate by 25 basis points to 2% on Thursday, marking the eighth cut since June last year.
The decision may prove to be the final act in its most aggressive easing cycle since the 2008 global financial crisis, when it cut seven times between October 2008 and May 2009.
“I think we are getting to the end of a monetary policy cycle that was responding to compounded shocks, including Covid, the illegitimate war in Ukraine, and the energy crisis,” ECB President Christine Lagarde said at a press conference in Frankfurt.
Lagarde called the decision “nearly unanimous” as the sole dissenting voice was Austria’s Robert Holzmann.
The ECB and the Federal Reserve have taken divergent paths in their monetary policies. The ECB has aggressively cut rates, while the Fed has made no cuts in 2025, holding its federal funds rate steady at 4.25%–4.5% since December 2024.
In comparison, in 2008, the ECB initially hiked rates to 4.25% in July, before reversing course in October, eventually arriving at 1% in May 2009. Meanwhile, the Federal Reserve was more aggressive, slashing rates from 5.25% in 2007 to near zero by December 2008 and launching quantitative easing.
Inflation Data-Supported Rate Decision
Eurostat’s latest flash estimate showed that annual inflation in the eurozone fell to 1.9% in May, down from 2.2% in April.
Core inflation, which excludes volatile energy and food prices, also moderated to 2.4% from 2.7%. Services inflation—a key driver in recent months—declined notably to 3.2%, its lowest level since early 2023.
“We are in a good position on the basis of the current trade path and with the 25 basis point cut that we decided, so that we can face …