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US growth cools more than expected in fourth quarter
The ECB lowered rates by 25 bps as inflation eases, while US growth slowed to 2.3% in Q4, and the Eurozone economy stalled amid contractions in Germany and France.
ECB cuts rates by 25 bps, lowering the deposit rate to 2.75% as inflation moderates.
US growth slows to 2.3% in Q4, missing forecasts of 2.6%.
Eurozone GDP stagnates, with surprise contractions in Germany (-0.2%) and France (-0.1%).
ECB delivers expected rate cut
The European Central Bank trimmed its key interest rates by 25 basis points in January 2025, aligning with market expectations as inflationary pressures continue to moderate. The move brings the deposit facility rate down to 2.75%, the main refinancing rate to 2.90%, and the marginal lending rate to 3.15%.
Policymakers pointed to easing price pressures, though domestic inflation remains sticky due to delayed wage adjustments and lingering cost pass-throughs. Wage growth is slowing, while corporate profit margins are absorbing some of the inflationary burden. Tight financing conditions persist, but the rate cut is expected to gradually lower borrowing costs for businesses and households.
The ECB maintained a data-dependent stance, refraining from signaling a clear trajectory for future policy moves. Officials reiterated their commitment to anchoring inflation at the 2% target, emphasizing a cautious approach amid lingering economic uncertainties.
US growth cools more than expected in fourth quarter
The US economy expanded at an annualized pace of 2.3% in the final quarter of 2024, marking its slowest growth in three quarters and falling short of forecasts for a 2.6% increase. The deceleration follows a 3.1% expansion in the previous quarter, according to an advance estimate from the Bureau of Economic Analysis.
The GDP increase was primarily driven by consumer and government spending, though softer business investment weighed on overall growth. Imports declined, offering some support to net trade.
For the full year, the economy grew 2.8%, marginally below the 2.9% expansion recorded in 2023, reflecting a resilient but cooling economic backdrop heading into 2025.
Eurozone economy stalls amid surprising contractions in Germany, France
The Eurozone economy stagnated in the fourth quarter of 2024, defying expectations for modest growth and capping off its weakest performance of the year. Preliminary data showed GDP flatlining after a 0.4% expansion in the previous quarter, missing forecasts of a 0.1% gain.
The bloc’s largest economies faced unexpected contractions—Germany’s GDP shrank by 0.2%, while France posted a 0.1% decline. Italy, meanwhile, remained in a holding pattern, marking its second consecutive quarter of stagnation.
The data raises concerns over the euro area’s economic trajectory, as persistent headwinds—from tighter monetary conditions to sluggish domestic demand—threaten to weigh on growth in early 2025.
