By Tom Fairless and Paul Kiernan
FRANKFURT--The European Central Bank lowered interest rates by a quarter point, beginning to reverse a historic series of rate increases and widening a policy gap with the Federal Reserve, which isn't expected to follow suit for months.
The ECB said Thursday that it would reduce its key interest rate to 3.75% from 4%, its first rate cut in almost five years. Future interest-rate decisions will be based on incoming economic data, the bank said in a statement. "The Governing Council is not pre-committing to a particular rate path," the ECB said.
The rate cut is a significant moment for investors and the world economy. It marks an inflection point in recent monetary policy and sends a signal that relief is on the way for households, indebted governments and businesses that have reined in investments in the face of high borrowing costs.
The cut also potentially puts the ECB and the Fed on different tracks and widens an existing gap in borrowing costs between the U.S. and Europe. While this could boost Europe's growth in the short term, the gap could also complicate the work of policymakers, especially in Europe.
Write to Tom Fairless at tom.fairless@wsj.com
(END) Dow Jones Newswires
06-06-24 0835ET
