ECB Cuts Rates Again Amid Rising Trade Tensions and Slowing Growth

The European Central Bank (ECB) has once again reduced its key interest rates, bringing the deposit facility rate down to 2.5%. This decision comes amid escalating trade tensions and a downward revision of economic growth forecasts for the eurozone.

Economic Outlook and Trade Tensions

Recent data indicates a slowdown in economic activity across the euro area. The ECB's latest projections estimate growth at 0.9% for 2025, a decrease from previous forecasts. Contributing factors include reduced exports and ongoing investment weakness, partly due to high trade policy uncertainty. Source

Trade tensions have been exacerbated by new U.S. tariffs affecting European exports. The World Trade Organization warns that these measures could reverse global trade growth, with forecasts dropping from +2.7% to a -0.2% decline. Source

Monetary Policy Adjustments

In response to these challenges, the ECB has implemented a series of interest rate cuts since June 2024. The current reduction marks the sixth in this cycle, aiming to ease borrowing costs and stimulate economic activity. The main refinancing operations rate now stands at 2.65%, and the marginal lending facility rate at 2.9%. Source

Despite these measures, lending remains subdued, and the effects of previous rate hikes continue to influence credit conditions. The ECB emphasizes a data-dependent approach, adjusting policies based on economic indicators without committing to a fixed rate path.

Looking Ahead

As the eurozone navigates these economic headwinds, the ECB's monetary policy will play a crucial role in supporting growth and maintaining price stability. The next policy meeting is scheduled for June 5, 2025, where further adjustments may be considered based on evolving economic conditions.

For more insights into the ECB's monetary policy decisions, visit the European Central Bank's official website.