ECB Cuts Interest Rates Six Consecutive Times Amid Trump Tariff Shock... Deposit Rate Falls from 2.5% to 2.25%

AFP Yonhap News

On the 17th (local time), the European Central Bank (ECB) cut its policy interest rate by 0.25 percentage points.

On the same day, the ECB held a monetary policy meeting in Frankfurt, Germany, and announced that it would lower the deposit rate from 2.50% per annum to 2.25%. The main refinancing rate was reduced from 2.65% to 2.40% per annum, and the marginal lending rate was adjusted downward from 2.90% to 2.65% per annum.

With this decision, the gap between the ECB’s key deposit rate and the U.S. Federal Reserve’s (Fed) benchmark interest rate (4.25?4.50%) widened to 2.00?2.25 percentage points. South Korea’s Bank of Korea kept its base rate steady at 2.75% on the same day, resulting in a 0.50 percentage point difference with the ECB.

Since changing its monetary policy direction in June last year, the ECB has cut its policy interest rate six consecutive times from September last year through this meeting. The deposit rate, which was 4% in June last year, has dropped by 1.75 percentage points over 10 months. Although there were expectations at the previous meeting that the pace of rate cuts could be moderated, the ECB decided on an additional cut due to the impact of U.S. President Donald Trump’s tariff policies.

The deposit rate has reached the upper bound of the neutral interest rate estimated by the ECB, which is between 1.75% and 2.25%. The neutral interest rate refers to the level at which economic growth is neither stimulated nor slowed down.

The ECB previously forecasted that if the U.S. and the European Union (EU) impose 25% tariffs on each other, the Eurozone’s economic growth rate would decrease by 0.5 percentage points.