The European Central Bank (ECB) cut interest rates for the fourth time this year as the country’s economy grapples with political disputes and US interest rates.
A quarter-percent cut from 3.25 percent to 3 percent will take rates to their lowest level since May 2023.
The ECB opened the door to further cuts as it lowered its tone on the need to keep rates ‘reserved’, warning of a 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 only a one in ten chance that the Bank will cut rates next week.
The fight against inflation: European Central Bank President Christine Lagarde said efforts to reduce inflation – now at 2.3% – are working.
Yesterday’s ECB move came as Germany and France, Europe’s two largest economies, are battling weak growth and political uncertainty.
In France, prime minister Michel Barnier was ousted in a vote of no confidence. And Europe could be in dire straits if Donald Trump imposes rolling tariffs on imports.
The ECB expects growth for the eurozone of 0.7 percent this year, revised from 0.8 percent. and 1.1 percent in 2025, revised from 1.3 percent.
The president of the ECB Christine Lagarde said that efforts to reduce inflation – now 2.3 percent – are effective but saw a ‘slower economic recovery’ in the ‘uncertainty .. . in abundance’.
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