ECB Interest Rate Cut

LONDON (Reuters) – The European Central Bank (ECB) cut interest rates for the seventh time in a year on Thursday, aiming to support the struggling eurozone economy facing challenges from U.S. tariffs.

Policymakers unanimously approved the cut, acknowledging that a global trade war has significantly altered economic forecasts, a source told Reuters.

The euro fell after the decision, trading at $1.1339, a 0.5% decline, down from $1.1367 prior. Germany’s 2-year bond yield remained flat at 1.75%, with earlier trades around 1.807%. Europe’s STOXX 600 index was down 0.3% for the day.

Comments from Economists:

• Andrew Kenningham, Chief Europe Economist at Capital Economics:

  • ECB’s rate cut from 2.5% to 2.25% was expected, indicating further policy easing. Growth outlook has deteriorated due to rising trade tensions, likely reducing confidence in households and firms.

• Steve Ryder, Senior Portfolio Manager, Aviva Investors:

  • Recent market dynamics influenced the ECB’s decision; they needed to adjust against risks stemming from U.S. tariffs affecting global growth and inflation expectations.

• Dean Turner, Chief Euro Zone Economist at UBS Global Wealth Management:

  • ECB is trying to balance concerns over growth and trade conflicts. Another rate cut is anticipated in June, with possible further easing depending on trade negotiations.

• Kirstine Kundby-Nielsen, FX Analyst, Danske Bank:

  • The ECB’s stance shows a focus on downside risks to growth due to trade uncertainties.

• Marchel Alexandrovich, Economist, Saltmarsh Economics:

  • The ECB’s decision responds to weaker inflation data amid uncertainty over U.S. tariffs.

• Natasha May, Global Market Analyst, JPMorgan Asset Management:

  • Consistency in the ECB’s approach is noted, given global trade uncertainties, but more aggressive rate cuts might be warranted owing to economic conditions.

• Zsolt Kohalmi, Global Head of Real Estate and Co-CEO, Pictet Alternative Advisors:

  • Expectations are for continued monetary policy easing as euro area growth is projected to remain below 1% this year, and inflation may drop below 2% by 2026.

• Yael Selfin, Chief Economist, KPMG:

  • The ECB remains cautious but signals further rate cuts may be necessary as trade uncertainties might lead to deflationary pressures in the economy.