Frankfurt/Vienna – The European Central Bank (ECB) has lowered interest rates again, cutting the key rate from 2.75% to 2.5%—its sixth reduction since last summer. All voting members approved the decision, except Austria’s central bank governor Robert Holzmann, who abstained. Holzmann, known for his strict stance on monetary policy, had also opposed the first rate cut last June.
The rate cut comes as inflation in the Eurozone eased to 2.4% in February, down from 2.5% in January. Service sector inflation, which had remained around 4% for months, dropped to 3.7%. The ECB stated, “The disinflation process is progressing well.” The bank now expects inflation to average 2.3% in 2025, slightly higher than its previous estimate of 2.1%.
However, Austria’s inflation rate remains higher, reaching 3.5% in February. Rising energy costs, the end of government price caps, and increased taxes have contributed to this trend. Service sector inflation in Austria stands at 4.5%, above the Eurozone average.
Looking ahead, economists predict more rate cuts in April and June, but uncertainty remains. The Eurozone economy is expected to grow by just 0.9% in 2025, down from the previous forecast of 1.1%.
For Austrian savers, high inflation means real losses on deposits. Fixed-term accounts offer a maximum of 2.5% interest, while at-call deposits earn up to 2.15%. With the Euribor rate declining, deposit interest rates are unlikely to rise soon.
