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ECB Cuts Deposit Rate to 2.25% as Trade Tensions Weigh on Growth

The European Central Bank unanimously approved its seventh rate cut since June 2023, citing U.S. tariffs as a key threat to eurozone economic stability.

Lagarde durante una comparecencia ante el BCE
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Overview

  • The ECB reduced its deposit facility rate by 25 basis points to 2.25%, continuing its monetary easing cycle to support growth and stabilize inflation near its 2% target.
  • Christine Lagarde emphasized the unanimous decision, with no members advocating for a larger cut, and reaffirmed a data-driven approach to policy decisions.
  • The decision reflects growing concerns over the economic impact of U.S. tariffs, described by Lagarde as a 'negative demand shock' that threatens eurozone growth.
  • Eurozone inflation dropped to 2.2% in March 2025, close to the ECB’s target, while GDP growth forecasts for 2025 were revised down to 0.9%.
  • The rate cut widens the policy gap with the Federal Reserve, which has maintained rates at 4.25–4.50%, as the ECB navigates heightened trade and financial uncertainty.