The European Central Bank (ECB) plans to continue cutting interest rates in 2025, according to Governing Council member Francois Villeroy de Galhau.
Speaking on Friday, Villeroy stated, “There will be more rate cuts next year, plural,” and expressed confidence in market projections of roughly 120 basis points of easing through 2025.
This follows the ECB’s fourth rate cut of 2024, with policymakers lowering borrowing costs amid slowing eurozone growth and political uncertainties in key economies like Germany and France. The ECB also abandoned language about maintaining restrictive monetary policy, suggesting further reductions from the current rate of 3%.
The ECB’s latest forecast predicts just 1.1% growth for 2025, excluding risks from U.S. trade policies under Donald Trump and ongoing political instability in Europe. Officials anticipate a quarter-point rate cut at the January meeting and likely another in March, with a larger reduction possible if economic conditions worsen.
Villeroy highlighted the ECB's flexibility to adjust the size, pace, and communication of its policy measures. Current rates remain above the neutral range, estimated at 1.7% to 2.5%, leaving room for further easing.
Also today, Estonian ECB member Madis Muller noted that high rates are already restraining the eurozone’s weak growth, while Latvian policymaker Martins Kazaks emphasized that larger cuts could be considered if necessary.