ECB cuts rates again to help economy weather US policy

The European Central Bank (ECB) cut interest rates for the seventh time in a year on Thursday and warned that economic growth will take a big hit from US tariffs, bolstering bets for even more policy easing in the months ahead.

- 

The ECB has taken borrowing costs to their lowest level since late 2022 as the sharp post-pandemic inflation spike has largely disappeared and fast-moving changes to trade policies sap business confidence and depress growth.

"Downside risks to economic growth have increased," Lagarde told a press conference after policymakers agreed unanimously to cut the ECB's benchmark rate by 25 basis points to 2.25%.

While US President Donald Trump has paused most tariffs, many remain in place and volatility in financial markets has already done damage, justifying a 25 basis point cut to 2.25 per cent, the vast majority of economists polled by Reuters said.

"Cutting the deposit rate 25 basis points to the top of (the neutral) range should be straightforward given the huge uncertainty and the likelihood that the trade war is not just a supply shock but will also likely hit demand," JPMorgan economist Greg Fuzesi said.

The ECB earlier estimated that growth across the 20 countries that share the euro currency could fall by a half a percentage point if tariffs are imposed, erasing about half the bloc's expected expansion.

That estimate could still prove too optimistic if Trump reverts to bigger trade barriers or if the European Union retaliates.