ECB to Cut Rates by 25bps

The European Central Bank is anticipated to reduce interest rates by 25 basis points this Thursday, positioning policy rates at the upper limit of the ECB’s projected neutral range. This action would represent the sixth consecutive rate reduction since June, decreasing the key deposit rate to 2.25%. The decision is driven by weakening economic growth, low inflation, and uncertainties stemming from U.S. tariffs. ECB President Christine Lagarde has cautioned that these tariffs could reduce Eurozone growth by half this year, down from an already subdued forecast of 0.9%. The recent appreciation of the euro, declining oil prices, and conservative consumer confidence are exerting downward pressure on inflation. Although a 90-day halt on EU-U.S. tariff retaliation provides temporary respite, the ECB remains apprehensive about the overall effects on investment and trade. Lagarde has recently indicated that the ECB is vigilant and prepared to take further measures if necessary to maintain price and financial stability.

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