New Interest Rate Cut by the ECB: Positive Response from Cypriot Banks

New Interest Rate Cut by the ECB: Positive Response from Cypriot Banks

European Central Bank Announces New Rate Cut – Positive Response from Cypriot Banks

The European Central Bank (ECB) has announced a new cut to its key interest rate by 0.25%, lowering the deposit facility rate to 2.25%. The decision takes effect on April 23, 2025, as part of the ECB’s broader monetary easing policy to support economic activity and ensure price stability in the eurozone.

Decision Details:
The ECB Governing Council decided to reduce its three key rates by 25 basis points each:

  • Deposit facility rate: 2.25%

  • Main refinancing rate: 2.40%

  • Marginal lending facility rate: 2.65%

Response from Cypriot Banks:
The decision had an immediate positive impact on the Cypriot banking sector, as the country’s major commercial banks moved to lower lending rates on loans linked to the ECB benchmarks, thereby relieving financial pressure on thousands of households and businesses.

  • Hellenic Bank:
    Announced a reduction of its reference lending rate for ECB-linked loans from 2.65% to 2.40%, effective April 23, 2025. This measure positively affects around 6,000 borrowers, including both individuals and businesses, and also covers loans tied to Euribor rates.

  • Bank of Cyprus:
    Similarly, Bank of Cyprus reduced its reference lending rate from 2.65% to 2.40% for ECB-linked loans, benefiting approximately 12,000 borrowers who will see lower monthly repayments.
    Since June 2024, the cumulative reduction in the ECB’s key rates has reached 2.1 percentage points, from 4.50% to 2.40%.

Impact on the Economy:
This new rate cut aims to boost liquidity in the financial system and lower borrowing costs, thereby supporting investments and domestic demand.
Key expected outcomes include:

  • Enhanced household purchasing power

  • Encouragement of new investments

  • Stronger economic activity

  • Improved market confidence

The ECB’s move comes at a critical time for Europe’s economic recovery, and Cypriot banks have responded swiftly and positively, passing the benefits directly to consumers and stimulating local economic growth.