The European Central Bank (ECB) has reduced the interest rate in the eurozone for the seventh time since June 2024. The rate has been cut by a quarter of a percentage point to 2.25%, the ECB announced in Frankfurt on Thursday.
This reduction aligns with analysts' expectations. A lower interest rate makes it cheaper for banks to borrow money from the ECB.
"The growth outlook has worsened due to increasing trade tensions," the ECB stated. "The increased uncertainty may reduce household and business confidence, and the negative and volatile market reaction to trade tensions could tighten financing conditions. These factors may further weigh on the economic outlook."
Although the ECB considered a rate pause a few weeks ago, the announcement of substantial import tariffs by US President Donald Trump has increased support within the ECB for further rate cuts.
Furthermore, inflation has continued to decline towards the ECB's target of 2%.
Investors anticipate two or three more rate cuts this year. However, given the turbulent geopolitical environment, it is unlikely that ECB President Christine Lagarde will provide clear signals regarding these expectations.
