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ECB cuts rates for sixth time
The European Central Bank reduced interest rates for the sixth consecutive time, citing a weakening economic outlook and moderating inflation, while reaffirming its data-driven approach to monetary policy.
The ECB lowered key interest rates by 25 basis points, bringing the deposit facility rate to 2.50%.
German 10-year bond yields rose to 2.9%, reflecting expectations of increased fiscal spending.
US job cuts surged to their highest level since 2020 amid government efficiency measures and economic uncertainty.
ECB cuts interest rates again
The European Central Bank (ECB) lowered its key interest rates by 25 basis points on Thursday, marking its sixth rate cut in an effort to manage inflation and support economic growth. The deposit facility rate was reduced to 2.50%, while the main refinancing rate and the marginal lending rate were lowered to 2.65% and 2.90%, respectively.
The decision follows an updated assessment of inflation trends and monetary policy transmission. Inflation is projected to average 2.3% in 2025 before easing to 1.9% in 2026 and stabilizing at 2.0% in 2027. Core inflation is also seen approaching the central bank’s 2% target. While domestic price pressures remain elevated due to lagging wage and price adjustments, wage growth is showing signs of moderation.
Meanwhile, economic growth forecasts were revised downward, with the eurozone economy expected to expand by 0.9% in 2025 and 1.2% in 2026, reflecting sluggish exports and weak investment. The ECB reiterated its data-dependent approach, emphasizing that future policy adjustments will be guided by inflation developments to ensure price stability over the medium term.
German bond yields surge on fiscal policy shift
Germany’s 10-year Bund yield climbed to 2.9% on Thursday, its highest level since October 2023, extending a sharp rise of nearly 30 basis points from the previous session. The move reflects market expectations of increased fiscal spending as coalition negotiations between the election-winning CDU/CSU and the Social Democratic Party signal a relaxation of the country’s strict borrowing constraints.
The coalition plans to ease debt brake restrictions, particularly for military spending, and has proposed a €500 billion off-budget fund to finance infrastructure projects over the next decade. The stimulus measures are expected to provide a much-needed boost to Germany’s slowing economy, which has struggled with weak industrial output and sluggish investment.
US job cuts soar to highest level since 2020
US employers announced 172,017 job cuts in February, the highest monthly total since July 2020, according to data released on Thursday. The figure represents a significant jump from January’s 49,795 layoffs and is the largest February total since 2009.
Analysts attributed the surge in layoffs to government efficiency measures, the cancellation of federal contracts, rising fears of trade conflicts, and an uptick in corporate bankruptcies. The labor market remains under pressure as businesses adjust to economic uncertainties, while policymakers continue to monitor employment trends amid broader concerns over economic stability.
