European stocks pared gains and the euro strengthened after the European Central Bank cut interest rates for the first time since 2019, but signaled it was still concerned about inflation. The ECB cut its deposit rate by a quarter-percentage point to 3.75%. The decision was widely expected, and investors are more focused on the ECB’s potential plans for any further rate cuts this year.
The euro rises against the dollar after the European Central Bank cut interest rates by 25 basis points, as widely expected, but said risks to inflation remained and that future decisions would depend on upcoming data. The ECB said inflation had come down sufficiently to warrant cutting rates but warned that because price pressures "remain strong" and wage growth is "elevated," inflation was likely to stay above target well into next year. "The Governing Council will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction," it said.
The European Central Bank lowered interest rates by a quarter point, beginning to reverse a historic series of rate increases and widening a policy gap with the Federal Reserve, which isn’t expected to follow suit for months. The ECB said it would reduce its key interest rate to 3.75% from 4%, its first rate cut in almost five years. “The Governing Council is not pre-committing to a particular rate path,” the bank said.
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