The European Central Bank (ECB) has cut the eurozone interest rate for the seventh time since June 2024, reducing it by a further 0.25 percentage point to 2.25%. The ECB made the announcement at its headquarters in Frankfurt on Thursday. The cut is in line with analysts’ expectations. Lower rates make it cheaper for banks to borrow from the ECB.
“The outlook for economic growth has deteriorated as a result of escalating trade tensions,” the ECB said. “Rising uncertainty is likely to dampen household and business confidence, while the negative and volatile market reaction to these tensions is likely to tighten financing conditions. These factors could further weigh on the economic outlook”.
Trump’s import tariffs
Although the ECB had recently been considering a pause in rate cuts, support for further easing grew after US President Donald Trump announced steep import tariffs. Inflation has also continued to fall towards the ECB’s 2% target.
Investors expect two to three more rate cuts this year. However, given the turbulent geopolitical climate, ECB President Christine Lagarde is unlikely to provide clear guidance at this stage.
