During her press conference, European Central Bank President Christine Lagarde outlined the ECB’s decision to cut key interest rates by 25 basis points at the March policy meeting. She elaborated on the rationale behind the move, emphasizing its role in supporting economic stability.
ECB press conference key highlights
“Consumer confidence remains fragile”
“Services are resilient”.
“Uncertainty is holding back investment”.
“Surveys suggest that employment growth is subdued”.
“Domestic inflation remains high”.
“Recent wage deals point to a continued moderation of wage pressures”.
“Risks to growth remain tilted to the downside”.
“Trade tensions could lower growth”.
“Defence and infrastructure spending could add to growth”.
This section below was published at 13:15 GMT to cover the European Central Bank’s (ECB) monetary policy announcements and the immediate market reaction.
On Thursday, as widely expected, the European Central Bank (ECB) reduced its key rates by 25 basis points at the March policy meeting. This move puts the main refinancing operations rate at 2.65%, while the marginal lending facility and deposit facility rates now stand at 2.90% and 2.50%, respectively.
ECB policy statement key takeaways
Inflation has continued to develop broadly as staff expected, and latest projections closely align with previous inflation outlook.
Staff now see headline inflation averaging 2.3% in 2025, 1.9% in 2026, and 2.0% in 2027.
For inflation excluding energy and food, staff project an average of 2.2% in 2025, 2.0% in 2026, and 1.9% in 2027.
Domestic inflation remains high, mostly because wages and prices in certain sectors are still adjusting to past inflation surge with a substantial delay.
Monetary policy is becoming meaningfully less restrictive, as interest rate cuts are making new borrowing less expensive for firms and households, and loan growth is picking up.
At the same time, a headwind to easing of financing conditions comes from past interest rate hikes still transmitting to stock of credit, and lending remains subdued overall.
Economy faces continued challenges, and staff have again marked down their growth projections – to 0.9% for 2025, 1.2% for 2026, and 1.3% for 2027.
Downward revisions for 2025 and 2026 reflect lower exports and ongoing weakness in investment, in part originating from high trade policy uncertainty as well as broader policy uncertainty.
Especially in current conditions of rising uncertainty, it will follow a data-dependent and meeting-by-meeting approach to determining appropriate monetary policy stance.
In particular, interest rate decisions will be based on its assessment of inflation outlook in light of incoming economic and financial data, dynamics of underlying inflation, and strength of monetary policy transmission.
ECB is not pre-committing to a particular rate path.
Market reaction to ECB rate decision
EUR/USD trades with decent gains above the 1.0800 barrier, or new YTD peaks, after the ECB’s rate decision.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.19% | 0.12% | -0.86% | 0.18% | 0.02% | -0.18% | -0.59% | |
| EUR | 0.19% | 0.29% | -0.70% | 0.36% | 0.21% | 0.00% | -0.40% | |
| GBP | -0.12% | -0.29% | -0.99% | 0.07% | -0.09% | -0.28% | -0.68% | |
| JPY | 0.86% | 0.70% | 0.99% | 1.06% | 0.92% | 0.68% | 0.31% | |
| CAD | -0.18% | -0.36% | -0.07% | -1.06% | -0.15% | -0.36% | -0.76% | |
| AUD | -0.02% | -0.21% | 0.09% | -0.92% | 0.15% | -0.20% | -0.60% | |
| NZD | 0.18% | -0.00% | 0.28% | -0.68% | 0.36% | 0.20% | -0.39% | |
| CHF | 0.59% | 0.40% | 0.68% | -0.31% | 0.76% | 0.60% | 0.39% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
This section below was published as a preview of the European Central Bank’s policy announcements at 08:00 GMT.
- The European Central Bank is on track to deliver another 25 bps interest rate cut on Thursday.
- The focus remains on the ECB’s updated economic forecasts and President Christine Lagarde’s words.
- The EUR/USD pair braces for intense volatility on the ECB policy announcements.
The European Central Bank (ECB) will announce its March interest rate decision on Thursday at 13:15 GMT. The central bank is set for its sixth-rate reduction since June 2024. Updated staff economic projections will be published at this meeting.
ECB President Christine Lagarde will hold a press conference at 13:45 GMT. At this conference, she will deliver the prepared statement on monetary policy and take questions from the media.
The Euro (EUR) remains poised for a big reaction to the ECB announcements against the US Dollar (USD).
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What to expect from the European Central Bank interest rate decision?
The ECB is on track to deliver another 25 basis points (bps) cut following its March policy meeting, reducing the benchmark rate on deposit facility from 2.75% to 2.5%.
The decision to cut the rate is undebatable, as the Euro area’s weak economic prospects remain a leading cause for concern for ECB policymakers. The old continent’s disinflation path remains intact, allowing the ECB some room to continue its easing trajectory.
Data released by Eurostat on Monday showed that the Eurozone Harmonized Index of Consumer Prices (HICP) rose 2.4% year-over-year (YoY) in February after recording a 2.5% growth in January. The market forecast was for a 2.3% acceleration in the reported period. Meanwhile, the core HICP advanced 2.6% YoY in February, compared with a 2.7% increase in January, meeting the 2.6% expectations.
However, the Bank’s hints on its next move on interest rates will grab the eyeballs amid looming United States (US) President Donald Trump’s reciprocal tariffs on the European Union (EU), which could significantly impact the bloc’s inflation and economic outlooks. Trump threatened to impose 25% tariffs on imports from the EU last week, claiming that the economic and political bloc was formed “to screw” the US.
Therefore, the language in the policy statement and the updated economic forecasts will be closely scrutinized to gauge the timing and the scope of the ECB’s future rate cuts. According to the latest Reuters poll, “the ECB will take another 50 bps off the deposit rate next quarter and then hold steady through at least 2026.” “Markets have fully priced in an end-December rate of 2.00%,” the survey showed.
The markets continue pricing further rate cuts even as top policymakers shared conflicting messages. ECB board member and a vocal policy hawk Isabel Schnabel said in a Financial Times (FT) interview last month: “We are getting closer to the point where we may have to pause or halt our rate cuts.”
“I’m not saying that we’re there yet. But we have to start the discussion,” she added.
On the other hand, her colleague and the head of the Italian central bank, Fabio Panetta, noted: “The available indicators seem to suggest that the predominant risk remains inflation falling below 2% over the medium term.”
Meanwhile, the accounts of the January ECB meeting published on February 27 showed: “Members concurred that the disinflationary process was well on track. But there was some evidence suggesting a shift in the balance of risks to the upside since December.”
The accounts added that some policymakers argued for “greater caution” regarding the size and pace of further rate cuts as policy rates were approaching the neutral level.
Previewing the ECB meeting, TD Securities analysts said: “With just five weeks since their last meeting, there’s little to move the dial, and a 25bps cut is broadly expected. Projections should see minimal changes, and while language around ‘restrictive’ policy may be changed slightly, we doubt there’s a full removal of that statement.”
“April/June will be the far more interesting meetings and highly dependent on tariffs,” the analysts added.
How could the ECB meeting impact EUR/USD?
The EUR/USD pair remains unstoppable in the run-up to the ECB event risk. The pair extends the recovery from two-week lows of 1.0360 as the Euro jumps on Germany’s proposed debt break reforms. Will the major sustain the recovery momentum on the ECB rate-call?
The ECB is expected to stick to its prudence on the policy outlook, reiterating that it is not on any pre-determined path on interest rates. However, if the Bank makes any material change to its “restrictive” policy language, markets could perceive it as a hawkish shift and add to the renewed EUR/USD upside. The pair is set to extend the recovery toward 1.0700 in such a scenario.
However, the main currency pair could come under intense selling pressure if there is no change in the language or tone of the policy statement. The Euro could suffer if ECB President Lagarde explicitly endorses future rate cuts, expressing concerns over a weak economic outlook.
Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD:
“The EUR/USD recovery remains unabated heading into the ECB showdown. However, The Relative Strength Index (RSI) sits within the overbought region on the daily chart, warranting caution for Euro buyers. If a correction unfolds, the immediate support of the 200-day Simple Moving Average (SMA) at 1.0723 will be tested. Acceptance under that level will put the 1.0600 round level at risk. The last line of defense for EUR/USD buyers is the 100-day SMA at 1.0507.”
“Should Euro buyers defy the bearish technical indicators, the door will likely open for a test of the 1.0900 level. Further up, the November 2024 high of 1.0937 will be on their radars.”
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.