European Central Bank Lowers Rates Again as Economic Uncertainty Grows

The ECB cuts its deposit rate to 2.5% while revising inflation and growth forecasts, highlighting challenges from trade tensions and defense spending shifts.

The European Central Bank announced its sixth interest rate cut since June 2024, reducing the deposit rate by 0.25 percentage points to 2.5%.
Economic projections for 2025 show inflation rising to 2.3%, driven by higher energy costs, while growth expectations are downgraded to 0.9%.
ECB President Christine Lagarde emphasized ongoing risks from U.S.-EU trade tensions and reduced global demand, which could further impact exports and investments.
Germany's decision to increase defense spending and public debt may boost growth but also complicates the ECB's monetary policy approach.
The ECB signaled that its monetary policy is becoming less restrictive but remains noncommittal about future rate adjustments given the uncertain economic landscape.