ECB lowers interest rates for first time since 2019

The European Central Bank on Thursday made its first interest rate cut since 2019, reducing borrowing costs from record highs, but the path ahead remains unclear with inflation volatile.

The key deposit rate was lowered a quarter point to 3.75 percent. Rates had been on hold since October, after an unprecedented streak of hikes starting mid-2022 to tame runaway consumer prices.

The ECB said in a statement that "price pressures have weakened, and inflation expectations have declined at all horizons," allowing it to start loosening credit.

The question now is how far and how fast the ECB, Federal Reserve and other central bankers will go in lower their benchmarks, with inflation subsiding but not yet back to levels considered best for the economy.

Analysts say the quarter-point cut on Thursday would likely not usher in a swift series of further cuts as the bank waits to make sure inflation is under control while easing credit to help the economy.

While inflation at an annual rate of 2.6% in May is well down from peak of 10.6% in October 2022, the decline has slowed in recent months and inflation even ticked up slighly from 2.4% in April. Inflation in the services sectors, a broad category that includes everything from medical care and haircuts to hotels, restaurants and concert tickets, remains elevated at 4.1%

Major central banks around the world now are leaning toward lowering interest rates. Central banks in smaller economies have already cut rates, including in Sweden, Switzerland, Hungary and the Czech Republic.

The Bank of England's policymakers are scheduled to meet on June 20, but it's not clear whether the governing board will cut the rate from 5.25%. Japan, an economic outlier among the world big economies,...

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