Central banks across Europe delivered significant policy moves on Thursday, as central banks across the world continue to ease monetary policies following the Covid-induced period of surging inflation.
The European Central Bank (ECB) delivered its fourth interest rate cut this year, reducing its deposit rate by 25 basis points to 3%.
ECB President Christine Lagarde noted that the eurozone economy continues to face "uncertainty ... in abundance" driven by political instability and the looming risk of a U.S. trade war.
While some policymakers advocated for a more aggressive 50-basis-point reduction, the unanimous decision to settle at 25 basis points reflects cautious optimism.
"The disinflation process is well on track," Lagarde stated. However, she cautioned that domestic inflation remains uncomfortably high, and further rate cuts are likely.
Economists anticipate the ECB could implement another cut as early as January, with inflation projected to align with the bank's 2% target by early 2025.
In Switzerland, the Swiss National Bank (SNB) enacted its largest rate cut in nearly a decade, slashing its policy rate by 50 basis points to 0.5%. The move, driven by lower-than-expected inflation and heightened global economic uncertainties, marks a departure from the more measured reductions of former chairman Thomas Jordan.
While new SNB chairman Martin Schlegel left the door open for future cuts, he suggested that the likelihood of negative interest rates - once a feature of Swiss monetary policy - has diminished. Swiss inflation stood at just 0.7% in November, comfortably within the SNB's target range of 0-2% since May 2023.
Meanwhile, Denmark’s central bank mirrored the ECB with a 25-basis-point rate cut, lowering its current account rate to 2.6% to defend the krone’s peg to the euro. This marks Denmark’s fourth rate cut this year as it seeks to maintain a 40-basis-point spread below the eurozone to weaken its currency.
The news follows the Bank of Canada's 50-basis-point cut earlier in the week, as rising unemployment forced policymakers to stimulate economic growth.
