Frankfurt, 5 June 2025 (dpa/MIA) - The European Central Bank (ECB) on Thursday announced it is lowering its benchmark deposit rate to 2%, marking the eighth time the eurozone's central bank has trimmed interest rates since June 2024.

Cutting rates could help to boost the weak eurozone economy by lowering the costs of borrowing, allowing companies to invest more.

The deposit rate, which credit institutions receive when they park money at the bank, is relevant for savers. If banks receive less interest from the ECB on their deposits, they reduce interest rates for customers.

The ECB also lowered its key refinancing rate, which provides liquidity to the banking system, to 2.15%, down from 2.4%.

US President Donald Trump's tariffs on trade have added to potential volatility, with ECB President Christine Lagarde having highlighted the risks to the economy posed by the disruption of the decades-old global order.

"Especially in current conditions of exceptional uncertainty, [the ECB] will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance," a statement from the central bank said on Thursday.

Economists had expected the ECB to lower its rates again, as inflation has decreased significantly in the euro area.

Inflation skyrocketed across Europe after the coronavirus pandemic and Russia's invasion of Ukraine in 2022, which forced up energy prices.

But the central bank now sees its goal of stable prices within reach, aiming for medium-term inflation of 2%.

According to a preliminary estimate by the statistics agency Eurostat, inflation fell below the ECB's target in May, dropping to 1.9%.

There are therefore indications that the latest rate cut may be the last in the eurozone for the time being.

Even advocates of loose monetary policy, such as Greece's central bank chief Yannis Stournaras, have suggested a pause following the June rate cut.

The ECB also said it expects only modest economic growth in the eurozone this year.

Despite the ongoing tariff dispute with the United States, the ECB is maintaining its March forecast of 0.9% growth.

For 2026, the ECB now predicts an increase in the eurozone's gross domestic product (GDP) of 1.1%, slightly lower than the 1.2% forecast in March.

Planned defence spending in Europe, amounting to billions of euros, is expected to contribute to growth.

For 2027, the central bank has kept its growth forecast unchanged at 1.3%.