Tag: European

The European Central Bank on Thursday said disinflation “is well on track,” and has broadly developed in line with staff projections.

Inflation is set to return to the 2% target this year, it said in a statement as it announced its latest interest rate decision, noting that it was “determined” to ensure inflation settled at this level.

The ECB also reiterated that it would follow a data-dependent, meeting-by-meeting approach to its policy decision making and that it was not pre-committed to a certain rate path.

Headline euro area inflation rose for the third consecutive month to 2.4% in December, after falling below the ECB’s 2% target several months earlier

— Sophie Kiderlin

The European Central Bank on Thursday said it was trimming interest rates by a further 25 basis points.

This is the fifth rate reduction since the ECB began easing monetary policy in June of 2024. This brings the ECB’s deposit facility, its key rate, to 2.75%.

— Sophie Kiderlin

The euro retreated slightly against major currencies ahead of the European Central Bank decision.

At 11:50 a.m. London time the euro was down 0.24% against the dollar, to $1.039.

The euro was also around 0.08% lower against the British pound.

Interest rate declines generally erode support for a currency.

— Sophie Kiderlin

The yield on bonds from euro area governments slipped as investors considered the latest growth data and looked to the European Central Bank’s interest rate announcement.

GDP data for the fourth quarter of 2024 from France, Germany and the euro area overall came in weaker than expected on Thursday.

Separately, the ECB is set to cut interest rates by 25 basis points later in the day.

The German 10-year bund yield was last down over 5 basis points at 2.518%, while the 2-year bund yield was more than 5 basis points lower at 2.218%.

France’s 10-year bond yield, meanwhile, was last trading at 3.263% after falling over 5 basis points, and the 2-year bond yield slipped more than 4 basis points to 2.404%.

— Sophie Kiderlin

“A cut is a done deal,” Sphia Salim, head of European rates research at BofA Global Research, told CNBC’s “Street Signs Europe” on Thursday.

This means changes to the statement accompanying the announcement and the press conference that takes place after will be key, she said.

“We will be watching more about any potential changes to the statement, but more importantly the press conference with in particular any comments with how the ECB looks at the recent rise in energy prices … and also how they react to the uncertainty around tariffs,” Salim noted.

U.S. President Donald Trump has repeatedly threatened that he will impose tariffs on imports to the U.S. from Europe.

European Central Bank President Christine Lagarde told CNBC last week that Europe must “be prepared” and anticipate any potential trade duties.

She said the fact that Trump had not imposed blanket tariffs on the first day of his presidency was a “very smart approach … because blanket tariffs are not necessarily giving you the results that you expect.”

As such, she said she expects Trump’s tariffs to be “more selective, focused.”

— Sophie Kiderlin

Germany’s economy contracted by 0.2% in the fourth quarter, preliminary data from German statistics agency Destatis showed Thursday, compared with a 0.1% shrink expected by a Reuters poll.

The figure is adjusted for price, calendar and seasonal variations. In the previous quarter Germany’s economy had expanded by 0.1%.

Household and government consumption expenditures increased, but exports were “significantly lower” than in the previous quarter, Destatis said.

“After a year marked by economic and structural challenges, the German economy thus ended 2024 in negative territory,” it added.

Read the full story here.

— Sophie Kiderlin

There will be plenty of questions for European Central Bank President Christine Lagarde in her post-announcement press conference on Thursday — including how the ECB views its divergence from the U.S. Federal Reserve, when it comes to their respective monetary policy easing cycles.

The ECB has so far cut interest rates four times, trimming by a quarter-percentage point on each occasion. The bank is set to announce its fifth trim on Thursday, with markets pricing in another three trims throughout the year.

The Fed meanwhile cut rates three times in 2024, including a bigger 50-basis-point reduction. It left rates unchanged when its meeting concluded on Wednesday, and fewer cuts are expected this year from the Fed compared to the ECB — likely just one or two.

Speaking to CNBC last week, Lagarde acknowledged the divergence, pointing to different economic environments in the euro area, compared to the U.S.

The euro area has been sluggish on the growth front, with some key economies like Germany and France in stagnation territory. The U.S. economy has meanwhile continued to grow at a solid pace.

— Sophie Kiderlin

The European Central Bank is widely expected to kick off its 2025 meetings with another interest rate cut on Thursday, as traders aim to gauge how far the central bank is willing to diverge from a stalled Federal Reserve.

Money markets on Wednesday were pricing in that the euro zone’s central bank will cut by at least a quarter-percentage point. That would take the deposit facility, its key rate, to 2.75% marking its fifth trim since it began easing monetary policy in June 2024.

Read CNBC’s full preview of Thursday’s ECB decision here.

— Jenni Reid