ECB cuts rates again but pause seen ahead
6/5/2025 7:34:55 PM
President Christine Lagarde said the European Central Bank was in a "good place" to deal with global uncertainty as it cut interest rates again Thursday, fuelling expectations it might soon hit pause after a lengthy easing cycle.
The ECB cut its key deposit rate a quarter point to two percent, as widely expected, its seventh consecutive reduction and eighth since June last year when it began lowering borrowing costs.
It also lowered its inflation forecast, with the indicator now expected to hit the central bank's two-percent target this year, as US President Donald Trump's tariff blitz exerts downward pressure on prices.
As inflation has stabilised following a post-pandemic surge, the ECB has shifted its focus to dialling back borrowing costs to relieve pressure on the 20 countries that use the euro.
Trump's tariffs have added to the uncertain outlook, with Europe firmly in his crosshairs, fuelling fears about a heavy hit to the continent's exporters.
But Lagarde struck a measured tone. While the US trade war was causing problems, she noted signs of growing strength in the eurozone economy as well as a potential future boost from plans for greater infrastructure and defence spending.
She refused to comment directly about whether the ECB would pause its cuts at its next meeting in July, as some expect, but she stressed repeatedly that the central bank was in a "good place".
"We are in a good position to navigate the uncertain conditions that will be coming up," she said.
"I think we are getting to the end of a monetary policy cycle," she added.
The ECB left its growth forecast for 2025 unchanged at 0.9 percent, and also noted inflation was now around its two-percent target -- dropping previous language that it was "on track". Eurozone inflation came in at 1.9 percent in May.
The ECB cut its key deposit rate a quarter point to two percent, as widely expected, its seventh consecutive reduction and eighth since June last year when it began lowering borrowing costs.
It also lowered its inflation forecast, with the indicator now expected to hit the central bank's two-percent target this year, as US President Donald Trump's tariff blitz exerts downward pressure on prices.
As inflation has stabilised following a post-pandemic surge, the ECB has shifted its focus to dialling back borrowing costs to relieve pressure on the 20 countries that use the euro.
Trump's tariffs have added to the uncertain outlook, with Europe firmly in his crosshairs, fuelling fears about a heavy hit to the continent's exporters.
But Lagarde struck a measured tone. While the US trade war was causing problems, she noted signs of growing strength in the eurozone economy as well as a potential future boost from plans for greater infrastructure and defence spending.
She refused to comment directly about whether the ECB would pause its cuts at its next meeting in July, as some expect, but she stressed repeatedly that the central bank was in a "good place".
"We are in a good position to navigate the uncertain conditions that will be coming up," she said.
"I think we are getting to the end of a monetary policy cycle," she added.
The ECB left its growth forecast for 2025 unchanged at 0.9 percent, and also noted inflation was now around its two-percent target -- dropping previous language that it was "on track". Eurozone inflation came in at 1.9 percent in May.