The European Central Bank (ECB) has lowered its deposit, refinancing and marginal lending rates by 25 bps effective June 11 after cutting its 2025 inflation forecast from 2.3 % to 2 %.
The three critical ECB interest rates will be lowered by 25 basis points as inflation in the region is currently around the Governing Council’s 2 % medium-term target.
Accordingly, the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will be decreased to 2.00%, 2.15% and 2.40% respectively, with effect from June 11, 2025.
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Deposit facility: The overnight deposit rate at which banks can park funds with the Eurosystem at a fixed interest rate.
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Main refinancing operations (MRO): The weekly rate at which banks borrow from the ECB using broad collateral; it sits above the deposit facility rate.
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Marginal lending facility: The overnight lending rate at which banks can access ECB credit against broad collateral; it is set above the MRO rate.
The numbers
The 19-member Euro area’s annual inflation is expected to be 1.9% in May 2025, down from 2.2% in April according to a flash estimate from Eurostat, the statistical office of the European Union.
Since March, outlooks for 2025 and 2026 have been trimmed by 0.3 percentage points because energy is expected to cost less and the euro is stronger. Excluding food and energy, inflation is still seen at 2.4% in 2025 and 1.9% in 2026–27.
The Risks estimated by ECB
While ECB estimates real GDP growth averaging 0.9% in 2025, 1.1% in 2026 and 1.3% in 2027, it is not discounting uncertainty around trade policies, which could impact growth and inflation under some alternative illustrative scenarios.
“The outlook for euro area inflation is more uncertain than usual, as a result of the volatile global trade policy environment,” Christine Lagarde, President of the ECB said in the press conference.
Some key points at the conference pointed towards economic growth facing more downside risks than upside, owed to global trade disruption. Exports could fall and businesses and consumers might cut back on spending.
ECB also cautioned that conflicts in Ukraine and the Middle East could worsen uncertainty.
Inflation’s path remains uncertain amid volatile trade policies, lower energy costs and a stronger euro.
Markets will now watch how this move affects borrowing costs for businesses and households across the euro-area in the coming quarters.
More read: ECB Press release