ECB cuts rates a quarter point amid concerns of tepid growth, impact of Trump trade policies
The European Central Bank is cutting interest rates by a quarter percentage point amid signs of weakening growth and concern about the impact of political chaos in France and the possibility of new U.S. import tariffs
FRANKFURT, Germany — The European Central Bank has cut rates by a quarter percentage point amid signs of weakening growth and concern about the impact of political chaos in France and the possibility of new U.S. import tariffs.
The bank’s rate-setting committee made the decision Thursday at its skyscraper headquarters in Frankfurt to lower the benchmark from 3.25% to 3%.
The bank said that efforts to return inflation to its 2% target were succeeding.
“The disinflation process is well on track,” it said in a statement accompanying the decision. It cautioned that it now foresaw “a slower economic recovery” than it did in a last set of projections in September.
Lower rates should support growth amid signs that the post-pandemic recovery is slowing in the 20 countries that use the euro currency and concerns that U.S. President-elect Donald Trump might impose new tariffs, or import taxes, on goods imported to the US after he is inaugurated Jan. 20. That sends a cold chill through the business world in Europe, where exports are an outsized contributor to growth and employment.
Yet there are internal risks as well.
French Prime Minister Michel Barnier resigned Dec. 5 after losing a vote of confidence, leaving the France without a functioning government and no clear majority in parliament able or willing to tackle the country’s excessive budget deficit. Elections cannot be held before June. While the end of the Barnier government hasn't triggered a financial crisis, it adds uncertainty about how long it will
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