The ECB has lowered interest rates: what does this mean for the economy?

The European Central Bank (ECB) recently announced a reduction in interest rates, which will take effect on 18 September. This step includes several significant changes in financial policy:

• Deposit facility overnight rate will be reduced by 0.25 percentage points to 3.5%.

• Main refinancing operations rate will decrease by 0.6 percentage points, reaching 3.65%.

• Loan facility overnight rate will be reduced by 0.6 percentage points to 3.9%.

This rate cut signals the ECB's goal to stimulate economic activity by easing borrowing conditions for both businesses and individuals. Lower interest rates make loans cheaper, which can stimulate investments and consumption. At the same time, yields on deposits are also reduced, encouraging companies and residents to use capital more actively to support growth.

However, such changes come at a time when the ECB continues to grapple with inflation, trying to find a balance between curbing it and stimulating economic growth. While lower rates can help stabilize markets and promote credit availability, they can also create pressure on inflation control, particularly if economic activity rises sharply.

Therefore, it will be crucial to monitor how these changes will impact the European economy as a whole.