On Thursday, January 30, the European Central Bank lowered its interest rate as scheduled by 25 basis points to 2.75%, marking the fifth rate cut since the start of the easing cycle in June 2024. The euro against the dollar remained slightly lower approaching 1.04, while the pan-European Stoxx 600 index maintained a 0.6% increase.

The Eurozone European Central Bank deposit facility rate is 2.75%, as expected at 2.75%, previous value was 3%.

The Eurozone European Central Bank marginal lending rate is 3.15%, as expected at 3.15%, previous value was 3.4%.

The Eurozone European Central Bank main refinancing rate is 2.9%, as expected at 2.9%, previous value was 3.15%.

The wording of the European Central Bank's policy statement is essentially the same as in December last year, stating that it is ready to adjust all tools at any time but does not pre-commit to any specific interest rate path, making decisions based on data at each meeting.

Analysts point out that this statement insists that 'current monetary policy remains restrictive' and that 'the Eurozone economy still faces challenges', suggesting that more easing measures are in the pipeline, with traders maintaining expectations of further easing from the ECB, predicting a reduction of 70 basis points in interest rates this year, bringing the policy rate to around 2%, just entering the Range perceived as neutral by most Analysts (between 2% and 2.25%).

The policy statement also stated that the choice to continue lowering rates is based on the latest assessments of the inflation outlook, potential inflation dynamics, and the effectiveness of monetary policy transmission, indicating that the assessment of inflation is consistent with the last meeting, describing it as 'progressing smoothly in the deflation process', still expecting inflation to fall to the central bank's medium-term target of 2% by 2025, and 'most potential inflation Indicators suggest that inflation will remain stable around the target.'

The statement believes that inflation in European countries remains high, mainly because wages and prices in certain Industries are still adjusting to the past surge in inflation, and this adjustment has taken a considerable amount of time. However, wage growth is slowing as expected, the increase in real income, and the gradual fading of the effects of previous restrictive MMF policies should support demand to recover over time.

Regarding the Asset Purchase Program (APP) and the pandemic emergency purchase program (PEPP) during COVID-19, the European Central Bank stated that the portfolios of these two bond-buying programs are declining at a controllable and predictable pace since there is no longer reinvestment of the principal of maturing securities.

Analysts generally notice that the futures market's bets on rate cuts by the European Central Bank this year far exceed expectations for rate cuts by the Federal Reserve, which seems to indicate a divergence in policy directions between the major central banks of Europe and the USA, with Europe facing more serious economic issues, and these were the focus of Lagarde's press conference.

The latest economic data released on Thursday also confirms the European Central Bank's concerns about sluggish growth in Europe.

The preliminary GDP growth rate for the Eurozone in the fourth quarter of last year was zero growth quarter-on-quarter, lower than the expected growth of 0.1% and also lower than the growth rate of 0.4% in the third quarter of last year. Among these, Germany, the "engine of Europe," experienced a larger-than-expected economic contraction in the fourth quarter of -0.2%, with significantly low exports; France, the second-largest economy in Europe, also saw a quarter-on-quarter contraction of 0.1% in GDP in the fourth quarter, both below market expectations, continuously suppressing Eurozone bond yields.

Some analysts point out that the European Central Bank's choice to continue lowering interest rates is intentional to downplay the recent resurgence of inflation above the 2% target in the past few months. The nominal inflation rate in the Eurozone rose to 2.4% in December, marking the third consecutive month of increase. The European Central Bank believes this is due to the fading base effect from falling Energy prices, expecting inflation rates to approach the 2% target again starting in the second quarter of this year, with greater concerns about economic weakness.

Sphia Salim, the head of European interest rate research at Bank of America Global Research, pointed out that the market is more focused on Lagarde's press conference, especially regarding how the European Central Bank views the recent comments on rising Energy prices, and their reaction to the uncertainties surrounding Trump's tariff policies.

Trump has repeatedly threatened to impose tariffs on goods imported from Europe to the USA. Last week, European Central Bank President Lagarde stated in a media interview that Europe must be "prepared" to anticipate any potential trade tariffs.

She stated that it was "a very wise move" for Trump not to implement comprehensive tariffs on the first day of his presidency, as comprehensive tariffs do not necessarily bring the expected results. Therefore, she anticipates that Trump's tariffs will be "more selective and targeted."