ECB cuts rates for sixth time since June despite sticky inflation

The ECB reduced its interest rates on Thursday afternoon during its March meeting, as analysts had anticipated.

The interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will be decreased to 2.50%, 2.65% and 2.90% respectively, with effect from 12 March 2025.

The interest rate on the main refinancing operations is the rate banks pay when they borrow money from the ECB for one week, while the rate on the deposit facility is what banks can use to make overnight deposits with the Eurosystem.

The rate on the marginal lending facility, meanwhile, offers overnight credit to banks from the Eurosystem.

Bank of America economist Ruben Segura-Cayuela had earlier described Thursday's decision as the "last easy rate cut".

The decision comes after inflation cooled to 2.4% in the eurozone in February, higher than the forecasted 2.3%.

While price pressures are nearing the ECB's 2% target, the total was predominantly driven up by services inflation - which came to 3.7% year-on-year.

On a monthly basis, consumer prices also rose 0.5% from January, the steepest increase seen since April 2024. 

Looking ahead, the prospect of a trade war with the US raises the chance that these totals could rise.

US President Donald Trump is threatening a 25% tariff on EU imports and the bloc has warned it would retaliate with its own levies.

Another factor complicating the eurozone's economic future is Russia's war in Ukraine.

With the new US administration pulling back military support for the EU, member states must raise their own military budgets, pushing up spending and debt levels.

While managing these risks, policymakers are also conscious of lacklustre growth across the eurozone.

In the final quarter of 2024,