The European Central Bank (ECB) cut interest rates for the fourth time this year as the continent’s floundering economy faces political strife and possible US tariffs.
The quarter-percentage point cut from 3.25 per cent to 3 per cent takes rates to their lowest since May 2023.
The ECB opened the door for further cuts as it watered down language about needing to keep rates ‘restrictive’, and warned of a darkening outlook. It comes as the US Federal Reserve is set for a rate cut next week.Â
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.
Inflation fight: European Central Bank President Christine Lagarde said efforts to bring down inflation – now at 2.3% – were bearing fruitÂ
Yesterday’s ECB move came as Germany and France, Europe’s two biggest economies, battle weak growth and political instability.
In France, prime minister Michel Barnier was forced out in a no-confidence vote. And Europe is likely to be badly affected if Donald Trump imposes swingeing tariffs on imports.
The ECB expects growth for the eurozone of 0.7 per cent this year, revised down from 0.8 per cent. and 1.1 per cent on 2025, revised from 1.3 per cent.
ECB president Christine Lagarde said efforts to bring down inflation – now 2.3 per cent – were bearing fruit but it foresaw ‘a slower economic recovery’ amid ‘uncertainty… in abundance’.
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