The European Union has become the second major economy in the world to cut interest rates on loans this week, presenting the move as progress in the fight against inflation.
The European Central Bank (ECB) has announced that the main interest rate has fallen from a record value of 4 percent to 3.75.
The EU's decision follows that of Canada, which also cut its interest rate.
Christine Lagarde, president of the ECB, has said that the outlook on inflation has improved "significantly", paving the way for rate cuts. However, she warned that inflation will remain above the 2 percent target (2.5 percent in 2024 and 2.2 percent in 2025).
The ECB has said it will keep interest rate policy tight for as long as it needs to fight inflation below the Bank's 2 percent target.
The reduction of lending interest is expected to increase economic activity by making loans cheaper.