More easing seen following ECB’s latest rate cut 

The European Central Bank (ECB) cut interest rates last week, in line with expectations. Continued policy easing in 2025 is likely.

Anticipating inflation moving toward its target and cautious over economic growth risks, the ECB lowered the deposit facility rate by 25 basis points (bps) to 3%.

ECB President Christine Lagarde emphasized their commitment to a data-dependent approach, stating that decisions will be made on a meeting-by-meeting basis. She also mentioned that the Governing Council had deliberated on a larger 50-bp cut but ultimately agreed on the quarter-point reduction.

What caused the move? 

The decision was made with growing confidence that inflation will continue its decline, stabilizing around the ECB’s 2% target on a sustained basis. Policymakers also remain cautious over downside risks to economic growth such as lower consumer and business confidence along with geopolitical risks.

While inflation is slowing, Lagarde acknowledged that the potential increase in US tariffs could be net inflationary.

Meanwhile, the economy is expected to strengthen over time, though more slowly than previously anticipated. Rising real incomes, increased investment, and the diminishing effects of restrictive monetary policy should provide an economic lift.

Asset impact 

European stocks experienced fluctuations following the ECB’s interest rate decision. Still,
the Euro Stoxx 50 – representing the Eurozone’s blue-chip companies – stabilized, closing last Thursday just 0.1% higher. The euro also showed volatility, ending the day 0.3% weaker.

Overall, the strategy is to maintain an underweight stance on the Eurozone given the region’s weak economic outlook and heightened uncertainties from political instability and geopolitical concerns.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.) 

SOPHIA THERESE “PIA” BONIFACIO is a Markets Research Analyst at Metrobank’s Trust Banking Group, covering local and offshore macroeconomic research. She obtained her Bachelor’s degree in Economics with a Specialization in Financial Economics, cum laude, from the Ateneo de Manila University and is a Certified UITF Sales Person (CUSP). Pia enjoys long road trips and is a self-proclaimed milk tea connoisseur. 

ANNA DOMINIQUE CUDIA, MBA, CSS, is the Head of Markets Research at Metrobank’s Trust Banking Group, spearheading the generation and presentation of financial markets insights to clients. She used to be with Metrobank’s Investor Relations, where she brought in international awards and took part in various multi-billion peso and dollar capital raising activities. She holds a Master of Business Administration (Finance) degree, with distinction, from the University of London, and industry certifications in finance. She is a naturally curious person and likes to travel here and abroad.