The European Central Bank went ahead with its first interest rate cut since 2019 on Thursday, citing progress in tackling inflation even as it acknowledged the fight was far from over.

In new forecasts released with the rate cut, the ECB said it expected inflation to average 2.2 per cent in 2025 — up from a previous estimate of 2.0 per cent — meaning it was now seen holding above the central bank’s 2 per cent target well into next year.

Inflation in the 20 countries that share the euro has fallen to 2.6 per cent from more than 10 per cent in late 2022, largely thanks to lower fuel costs and an easing of post-pandemic supply snags.

But that progress has stalled recently and what had looked like the start of a major ECB easing cycle only a few weeks ago now appears more uncertain due to signs that inflation may prove sticky, as it has in the United States.

Cutting its deposit rate to 3.75 per cent from 4.0 per cent, the ECB did not indicate whether further easing would follow that in July.

“We are not pre-committing to a particular rate path,” ECB president Christine Lagarde told a press meet.

“Despite the progress over recent quarters, domestic price pressures remain strong as wage growth is elevated, and inflation is likely to stay above target well into next year.”