ECB cuts benchmark interest rate by quarter point as Trump tariffs threaten economy

The European Central Bank cut its benchmark interest rate for an eighth time, aiming to support businesses and consumers with more affordable borrowing as U.S. President Donald Trump’s trade war threatens to slow already tepid growth.The bank’s rate-setting council cut interest rates by a quarter of a point Thursday at the bank’s skyscraper headquarters in Frankfurt. Analysts expected a cut, given the gloomier outlook for growth since Trump announced a slew of new tariffs April 2 and subsequently threatened to impose a crushing 50% tariff, or import tax, on European goods.
The bigger question remains how far the bank will go at subsequent meetings. Bank President Christine Lagarde’s remarks at a post-decision news conference will be scrutinized for hints about the bank’s outlook.
Thursday’s decision took the bank’s benchmark rate to 2%, down from a peak of 4% in 2023-24.The bank raised rates to suppress an outbreak of inflation in 2021-23 that was triggered by Russia’s invasion of Ukraine, and by the rebound from the pandemic. But as inflation fell, the bank shifted gears toward supporting growth by lowering rates. With inflation now down to 1.9%, below the bank’s target of 2%, analysts say the bank has room to take rates even lower to support growth.

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