On 6 March 2025 the ECB cut rates by a quarter of a point, its sixth cut since June 2024, and said its policy was now “meaningfully less restrictive”.
The Governing Council of the European Central Bank (ECB) decided on 6 March 2025 to lower its three key interest rates by 25 basis points. The deposit facility rate, the benchmark for its policy, went to 2.50%; the main refinancing operations rate to 2.65%; and the marginal lending facility rate to 2.90%, effective from 12 March. It was the sixth cut since June 2024, when the ECB began lowering rates from 4%.
What changed in the message
More than the cut itself, which markets had taken for granted, the change of language caught the eye. The ECB stopped describing its policy as restrictive and said instead that it was “meaningfully less restrictive”, a way of signalling that rates are approaching the point at which they no longer hold the economy back. Christine Lagarde, its president, stressed that decisions would be taken meeting by meeting, depending on the data, without pre-committing to a path.
The new staff projections put average inflation at 2.3% in 2025, 1.9% in 2026 and 2.0% in 2027, and cut euro-area growth to 0.9% in 2025 and 1.2% in 2026. Behind the revision were weak exports and uncertainty over US trade policy.
A fast-moving backdrop
The meeting came in an exceptional week. Two days earlier the European Commission had presented a plan to mobilise up to €800 billion for defence, and in Germany the parties about to form a government had agreed to loosen the debt brake to invest in defence and infrastructure. The yield on the ten-year German Bund posted its biggest daily rise since 1990.
More public spending and more debt can, over time, push up inflation and long-term rates just as the ECB is trying to bring short-term ones down. That is why some Governing Council members urged caution before cutting further.
What it means for mortgages and savings
For families with variable-rate mortgages, each ECB cut feeds through to Euribor with a lag, and Euribor had already priced in much of the easing: in February 2025 twelve-month Euribor stood at around 2.4%, far from the 4% of late 2023. For savers, deposits and Treasury bills offer ever lower returns.
For companies with floating-rate borrowing, the relief continues too, though more slowly. It is worth checking when loans are repriced and, if new debt is being negotiated, comparing fixed and floating rates against the rate path the market is pricing in. Ask your adviser how this applies to you.
When a central bank changes an adjective, it is usually announcing its next step.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
