ECB Cuts Rates, Signals Further Easing Amid Trade Concerns
FRANKFURT, Germany (Reuters) - The European Central Bank (ECB) lowered interest rates as anticipated on Thursday and hinted at the possibility of additional easing measures. This decision aligns with the bank's assessment that inflation within the eurozone remains under control despite ongoing worries about global trade.
The fifth ECB rate cut since June was widely anticipated by the market. The central bank lowered the interest rate it offers on deposits from 3.0% to 2.75%.
Despite signs of improvement in recent surveys, the eurozone economy has remained subdued. Inflation has hovered slightly above the ECB's 2% target, justifying Thursday's rate reduction.
"The disinflation process is progressing as expected," the ECB stated.
"Domestic inflation persists at elevated levels, primarily due to delays in the adjustment of wages and prices in certain sectors to the previous inflation surge," the ECB noted. "However, wage growth is moderating as anticipated, and corporate profits are partly absorbing the inflationary impact."
Following the recent actions of the Trump administration, ECB policymakers likely experienced some relief as the new U.S. government did not impose blanket trade tariffs. However, the administration's ongoing threats have created uncertainty regarding the economic outlook.
Tariffs can stifle economic growth, and if retaliation occurs, inflation may rise, potentially undermining the ECB's easing plans.
ECB President Christine Lagarde is scheduled to host her routine press conference at 1345 GMT. Market participants will be attentive to any remarks regarding trade, persistently high inflation in the services sector, and the volatility in financial markets.
In addition to the rate cut, the ECB also lowered the rate at which banks can borrow from the central bank for a week (to 2.90% from 3.15%) and for a day (to 3.15% from 3.40%).