Finance
ECB cuts rates for eighth time amid trade war risk
Published by Global Banking & Finance Review®
Posted on June 5, 2025
2 min readLast updated: January 23, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on June 5, 2025
2 min readLast updated: January 23, 2026
The ECB cut rates again, citing trade war risks and euro zone growth concerns. Inflation is at target, but economic outlook remains uncertain.
FRANKFURT (Reuters) -The European Central Bank cut interest rates for the eighth time in a year on Thursday, acknowledging inflation was under control and turning more pessimistic about the euro zone's economic prospects amid risks of a trade war with the United States.
Thursday's cut lowers the rate that the ECB pays on bank deposits from 2.25% to 2.0%, the middle of the range that the central bank sees as "neutral" - neither curbing nor boosting the economy.
The ECB kept all options open for its subsequent meetings, although some policymakers and many investors expect a pause in rate cuts at its next meeting in July.
"Especially in current conditions of exceptional uncertainty, (the ECB) will follow a data-dependent and meeting-by-meeting approach," it said.
Euro zone inflation has fallen back to the ECB's 2% target after a torrid three years and even previously stubborn price growth in the services sector has slowed.
This is allowing the central bank to shift its focus to the euro zone's sluggish growth outlook, which has been made worse by U.S. President Donald Trump's tariff threats.
The ECB, however, also acknowledged the prospect greater government spending.
"While the uncertainty surrounding trade policies is expected to weigh on business investment and exports, especially in the short term, rising government investment in defence and infrastructure will increasingly support growth over the medium term," the ECB said.
With Thursday's decision, the ECB also cut the interest rate at which banks can borrow at its weekly auctions - to 2.15% from 2.40% - and overnight, to 2.40% from 2.65%.
Attention will now turn to ECB President Christine Lagarde's press conference at 1245 GMT.
(Reporting By Francesco Canepa; Editing by Catherine Evans)
The European Central Bank cut interest rates for the eighth time in a year, lowering the deposit rate from 2.25% to 2.0%.
The ECB acknowledged that inflation is under control, having fallen back to its 2% target after a challenging three years.
The uncertainty surrounding trade policies is expected to weigh on business investment and exports, particularly in the short term.
The ECB recognized the prospect of greater government spending, particularly in defense and infrastructure, which could help offset the negative impacts of trade uncertainty.
While the ECB kept all options open for subsequent meetings, many investors expect a pause in rate cuts at the next meeting in July.
Explore more articles in the Finance category
