LONDON (Reuters) – Euro zone government bond yields and the euro held steady on Thursday after the European Central Bank cut interest rates by 25 basis points to 2.75%, as expected, while keeping the door open to further policy easing.
The German 10-year bond yield, the benchmark for the euro area, was last down 6 basis points on the day at 2.51%, having dropped earlier after weak growth data.
The euro was down 0.2% against the dollar at $1.0403, broadly in line with where it was trading before the decision.
The pan-continental STOXX 600 index was up 0.6% at 537.23 points, within a whisker of its record intraday high of 537.7 reached earlier in the session.
The ECB lowered interest rates for the fifth time since June last year and reaffirmed that the disinflation process was “well on track”.
“At 2.75%, the deposit interest rate is still restrictive – too restrictive for the eurozone economy’s current weak state,” said Carsten Brzeski, global head of macro at ING.
Data on Thursday showed the euro zone economy stagnated in the fourth quarter, falling short of expectations for a 0.1% expansion.
Money market futures are pricing in about 69 basis points of further easing from the ECB this year, implying two more quarter-point rate cuts and around a 75% chance of a third.
(Reporting by Samuel Indyk; Editing by Amanda Cooper)
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