ECB Cuts Key Rates 25 Basis Points Amid Economic Uncertainty

The European Central Bank (ECB) has lowered its key interest rates by 25 basis points, aligning with market expectations. The deposit facility rate was reduced to 2.25%, the main refinancing rate to 2.40%, and the marginal lending facility to 2.65%. This marks the sixth consecutive rate cut by the ECB, demonstrating a consistent effort to manage economic conditions.

The decision to cut rates was driven by several factors, including subdued inflation, weakening growth, and uncertainty from US tariffs. The ECB's move comes amid a backdrop of weakening growth prospects and rising global trade tensions, which are hurting confidence and tightening financial conditions. The central bank acknowledged these risks and emphasized a data-dependent approach going forward. It made no commitment to further cuts, underlining that future decisions will depend on economic data, inflation dynamics, and the strength of monetary transmission.

ECB President Christine Lagarde has warned that the tariff impact could slash Eurozone growth this year by half, from an already modest forecast. Recent euro strength, falling oil prices, and cautious consumer sentiment are adding downside pressure to inflation. While a 90-day pause in EU-US tariff retaliation offers temporary relief, the ECB remains concerned about the broader impact on investment and trade.

The ECB's decision to cut rates by 25 basis points marks the seventh reduction in a year, reflecting the central bank's commitment to supporting the Euro Area economy. The move comes as the ECB continues to monitor the impact of global trade tensions and other external factors on the Euro Area outlook. The central bank remains alert and ready to act further if needed to ensure both price and financial stability.