European markets show a muted response to the ECB rate cut

ROME, 6 June (Xinhua) – The markets had a muted response Thursday after the European Central Bank issued its first rate cut since 2019. This shows that the European Economy is willing to break away from the monetary policy of other major central banks.

The main European Union stock markets showed modest gains on Thursday. The main indexes of the bourses at Amsterdam, Frankfurt Madrid, Milan and Paris finished higher.

The blue-chip index at the Milan Stock Exchange rose by nearly 1 percent. Italy, as a major exporter is especially affected by changes in interest rates policy.

The euro currency fell against the U.S. Dollar and the British Pound.

It was widely expected that the ECB would cut its benchmark interest rate to 3.75 percent by 25 basis points. The previous rate had reached an all-time record. This was the first rate cut by the ECB in five years.

The ECB started raising rates in 2022 in order to combat inflation triggered by a surge in energy prices following the conflict between Russia & Ukraine.

On Thursday, the ECB stated that it was still concerned about inflation.

The ECB stated that despite the recent progress, the domestic price pressures are still strong due to wage growth. Inflation is expected to remain above target for the rest of the year.

The ECB has also increased its forecast for inflation in the 20 nation euro currency zone, to 2.5 percent in this year and 2.2 in 2025.

The ECB made its decision after Canada cut its rate on Wednesday, bringing it down from 5 percent per cent to 4,75 percent. The U.S. Federal Reserve is expected to make a decision about rates next week, and the Bank of England could do so at its June 20 meeting.

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