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The European Central Bank (ECB) cut interest rates for the fourth time this year as the continent’s faltering economy faces political conflict and possible US tariffs.
The quarter percentage point cut from 3.25 percent to 3 percent takes rates to their lowest level since May 2023.
The ECB opened the door to further cuts by softening language on the need to maintain “restrictive” rates and warned of an increasingly bleak outlook. It comes as the US Federal Reserve is set to cut rates next week.
The Bank of England has been more cautious, despite low inflation, and traders see just a one in ten chance of the Bank cutting rates next week.
Fighting inflation: European Central Bank President Christine Lagarde said efforts to reduce inflation, now at 2.3%, were bearing fruit
Yesterday’s ECB move came as Germany and France, Europe’s two largest economies, struggle with weak growth and political instability.
In France, Prime Minister Michel Barnier was forced to resign in a vote of no confidence. And Europe is likely to be hit hard if Donald Trump imposes high tariffs on imports.
The ECB expects eurozone growth of 0.7 percent this year, revised down from 0.8 percent. and 1.1 percent in 2025, revised from 1.3 percent.
ECB President Christine Lagarde said efforts to reduce inflation – now at 2.3 percent – were bearing fruit, but she anticipated “a slower economic recovery” amid “uncertainty… aplenty.”
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