European Central Bank cuts interest rate to 3.25 percent

The European Central Bank (ECB) has lowered the interest rate to 3.25 percent. This is the main interest rate at which commercial banks can borrow money from the ECB for the short term.

On Thursday, Oct. 17, ECB President Christine Lagarde announced in a press conference that policymakers cut interest rates by 25 basis points. This is the third cut this year, following previous adjustments in June and September.

The cut stems from weaker business confidence and a faster-than-expected decline in inflation. The ECB aims to bring inflation back to the medium-term target of 2 percent. Currently, euro area inflation stands at 1.8 percent, its lowest level since 2021.

The markets had the interest rate change already largely factored in. The DAX rose 0.78 percent to 19,583 points. The crypto market reacted cautiously, however, with Bitcoin falling 1.1 percent on a daily basis. Analysts expect higher crypto prices in the long run, however, as lower interest rates often lead to more liquidity in the markets, which is usually positive for Bitcoin.