On Thursday, the European Central Bank (ECB) declared an end to the period of increasing interest rates, reducing its main rate. First, they cut it from 2.5% to 2.25%. It is the seventh rate cut in a year. Full Employment It’s intended to push back against the neoliberal economic storm that’s engulfed the Eurozone. The action takes place as analysts and economists had almost universally expected more moves, given the firming up of the country’s deepening economic crisis.
The ECB’s interest rate decision is truly historic. This action will immediately reduce borrowing costs for the 20 countries that share the euro. By reducing borrowing costs, the central bank hopes to encourage spending and investment, fostering economic growth amid concerns about stagnation and inflation.
This most recent cut is in line with other cuts that have marked the European Central Bank’s monetary policy in recent months. As the world’s economic circumstances have changed, the major central banks around the world have tried to stimulate growth by lowering interest rates. The ECB remains deeply devoted to upholding stability in the Eurozone economy. Now more than ever, it takes on urgent crises such as trade wars and a cooling domestic economy.
Economists assume that ECB’s rate reduction will help reinvigorate spending and investment both by households and firms. These actions could open up new avenues of credit and create a large increase in untapped demand. This much-needed decision will stimulate new consumer spending. That’s not nearly enough for the region’s long-term economic recovery, which would need such a boost to be truly transformative.