The European Central Bank (ECB) cut interest rates for the eighth time this year on Thursday. While stating that inflation is now under control, the bank also expressed growing concerns about the eurozone economy, particularly due to escalating trade tensions with the United States.
With this latest cut, the ECB’s deposit rate was reduced from 2.25% to 2.00%.
This rate is within the range the bank defines as “neutral” — meaning a level that neither stimulates nor restricts economic activity.Data-Driven Decision-Making
The ECB, while stating that further interest rate hikes are possible in the future, emphasized that it will proceed cautiously. “Especially in the current conditions of extraordinary uncertainty, the ECB will continue its data-driven and meeting-to-meeting decision-making approach,” the statement said, indicating that there may be no interest rate change at the next meeting in July. ✅ Inflation Under Control, Eyes on Growth Eurozone inflation has fallen to the ECB’s 2% target level after three years of high inflation. Signs of cooling are beginning to appear, even in the services sector where price increases have persisted. This situation gives the ECB the opportunity to focus on compensating for the weakness in economic growth.
In addition, US President Donald Trump’s foreign trade policies, which he threatens with tariffs, are negatively impacting the investment environment and export expectations, increasing uncertainties in the euro area.
Hope from Public Spending
Despite short-term risks, the ECB expects governments to focus on defense and infrastructure The ECB stated that increased spending in this area could support growth in the medium term. “Uncertainties regarding trade policies may suppress investment and exports in the short term, but increased public investment will support growth over time,” the statement said.
Other Interest Rate Cuts Also
The ECB lowered not only the deposit rate but also the main refinancing interest rate paid by banks in weekly auctions from 2.40% to 2.15%. Additionally, the overnight borrowing rate was reduced from 2.65% to 2.40%. These steps demonstrate that the ECB is both trying to act in line with falling inflation and taking a proactive approach to supporting euro area growth in the face of geopolitical and economic challenges.
