eurozone interest rates cut amid economic concerns and trade tensions

The European Central Bank (ECB) has recently reduced its deposit rate by 25 basis points, from 3.25% to 3.00%. This decision was made in response to a widening interest rate differential with Switzerland, which currently stands at 2.5 percentage points following a 50 basis point cut by the Swiss National Bank (SNB).

As a result of this rate cut, the euro has gained 0.4% against the Swiss franc, reaching 0.9316 francs. Inflation in the eurozone has slightly increased to 2.3% in November, while the ECB aims for a medium-term annual rate of 2.0%. However, economic growth forecasts have been revised downwards, with the ECB now projecting a growth rate of 0.7% for the current year, down from the previous estimate of 0.9%.

Concerns over trade conflicts and a pronounced wage-price spiral in eurozone countries compared to Switzerland have led to adjusted growth outlooks of 1.1% for 2025 and 1.4% for 2026.

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