The European Central Bank lowered its interest rates for a fourth policy session in a row on Thursday and is likely to opt for more easing going forward as policymakers seek neutrality amid a slump in Eurozone growth and expectations for inflation to return to target over the course of the year.

The Governing Council, led by ECB President Christine Lagarde, lowered the benchmark - the deposit rate - by 25 basis points to 2.75 percent. The main refinancing rate was trimmed by a similar volume to 2.90 percent and the lending rate to 3.15 percent, respectively.

The central bank for the single currency bloc has lowered interest rates by a quarter basis points each in every rate-setting session since September. "The disinflation process is well on track," the ECB said in a statement.

"Inflation has continued to develop broadly in line with the staff projections and is set to return to the Governing Council's 2 percent medium-term target in the course of this year," the bank said.

Monetary policy remains restrictive, the bank reiterated, adding that rising real incomes and the gradually fading effects of restrictive monetary policy should support a pick-up in demand over time.

Responding to questions from reporters, Lagarde said the latest rate cut decision was unanimous and that it was "premature" for policymakers to discuss an end to policy easing. While the U.S. Federal Reserve adopted a wait-and-watch approach on Wednesday as it left the federal funds rate unchanged, the ECB is likely not done with rate cuts. Economists are looking forward to the next reduction as soon as March.

Commerzbank economists said the ECB is set lower rates by three times, by 25 basis points each, by the middle of the year. "The next step is likely to take place in March, when the ECB publishes its updated projections for inflation and GDP," Commerzbank economist Jorg Kramer said. "We continue to expect the deposit rate to reach 2.0 percent in the middle of the year."

ING economist Carsten Brzeski said Lagarde's press conference signaled a clear intent to lower rates further.

"They're still in restrictive territory, and reaching neutral seems like the next stop - but not necessarily the final one," Brzeski said. "We think Lagarde's position on the lookout for economic developments could very well turn into a full blown sprint." The ECB also reiterated that policymakers would stick to a data-dependent and meeting-by-meeting approach to determine the appropriate monetary policy stance and that they will not pre-commit to a particular rate path. Eurozone economy stagnated in the fourth quarter of 2024, official data showed earlier on Thursday. In the policy statement, Lagarde said the economy is set to remain weak in the near term as manufacturing continues to shrink and household consumption needs a boost despite rising real incomes.

Meanwhile, conditions for a recovery remain in place, Lagarde said. A robust labor market and more affordable credit are expected to boost consumer confidence and consumption.

The risks to economic growth remain tilted to the downside, Lagarde said. In December, the ECB staff had lowered their economic growth projections.

Price growth in the euro area accelerated to a five-month high of 2.4 percent in December, while core inflation held steady at 2.7 percent. The central bank sees upside risks to euro area inflation from bigger than expected increase wages or profits and heightened geopolitical tensions that could push commodity prices and, freight costs and disrupt global trade.

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