The European Central Bank has implemented a significant interest rate cut, bringing its main deposit rate down to 2%. This marks the eighth quarter-point reduction within a year, a move aimed at revitalizing economic growth across the 20-member eurozone. The central bank emphasized the urgent need for cheaper borrowing costs to counter the economic damage inflicted by ongoing global trade conflicts.
The decision comes as the eurozone grapples with a noticeable slowdown in economic activity, particularly in major economies like France, Germany, and Italy. Forecasts for the coming year paint a weak picture, underscoring the severity of the economic headwinds. This reduction places eurozone borrowing costs at less than half the level seen in the UK and significantly lower than the rates maintained by the US Federal Reserve, drawing sharp criticism from the US President.
Despite the current challenges, ECB President Christine Lagarde noted factors that could help the bloc withstand global volatility, including a strong labor market and robust private sector balance sheets. While acknowledging the uncertainty, the ECB is betting on increased government spending on defense and infrastructure to partially offset the impact of trade tariffs.
