The European Central Bank cut its main interest rate by a quarter point on Thursday, citing rising trade tensions following U.S. President Donald Trump’s sweeping tariff campaign. The decision brings the rate down to 2.25 percent, marking the ECB’s seventh cut in the past year.
In a statement, the bank said eurozone economies had built some resilience against global shocks, but the outlook for growth had worsened. Trade friction, it said, was now a defining risk.
ECB President Christine Lagarde told reporters the effects were already visible. Business investment was slowing, she said, and consumers were growing cautious. “Disruptions to international commerce, financial market tensions and geopolitical uncertainty are weighing on business investment,” Lagarde said. “As consumers become more cautious about the future, they may pull back on spending.”
Trump’s tariff policy, announced on April 2, has sparked a broader trade war with retaliatory threats from Europe and Asia. Economists warn the fallout may ripple through global supply chains.
Yael Selfin, chief economist at KPMG, said trade disruptions could lead to a glut of manufactured goods and potential deflation. “The outfall of the trade disruptions could create a global glut of manufactured goods,” she said. “That could push prices into deflationary territory this year.”
While the ECB has moved to protect the eurozone economy, the U.S. Federal Reserve has taken a different approach. At its most recent policy meeting in March, the Fed held interest rates steady. Chair Jerome Powell signalled that uncertainty from Trump’s tariffs may keep rates unchanged for the foreseeable future.
Speaking in Chicago on Wednesday, Powell offered his strongest remarks yet. “These are very fundamental policy changes,” he said, warning that the tariffs could drag on growth.
Trump reacted swiftly. On social media, he criticised Powell’s decision to hold rates and called the Fed’s latest report a “complete mess.” He added, “Powell’s termination cannot come fast enough.”
Lagarde responded with calm defiance. “I have a lot of respect for my esteemed colleague and friend Jay Powell,” she said at her press conference. She also underscored the ECB’s independence, warning against political interference in monetary policy.
“For us, here, the independence of central banks is fundamental,” Lagarde said. “Any country that wants to join the eurozone must prove it can uphold that independence in law and in practice.”
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European Union foreign policy chief Kaja Kallas has warned that attempts to reach a peace agreement in Ukraine are being undermined by Russia’s continued refusal to engage meaningfully in negotiations.
Russian Deputy Prime Minister Alexei Overchuk visited Yerevan to participate in the Armenia-Russia Intergovernmental Commission meeting, as both countries review economic cooperation.
The European Union faces a critical decision on how to finance Ukraine’s war effort, divided over whether to use frozen Russian assets or jointly borrow funds through 2027.
Kyrgyzstan has joined the TRACECA multilateral permit system, a move analysts say will deepen regional integration, cut transport costs and ease cross-border trade, opening new routes to Europe and the Black Sea.
Ukraine has welcomed the European Union’s decision to provide €90 billion in support over the next two years, calling it a vital lifeline even as the bloc failed to reach agreement on using frozen Russian assets to finance the aid.
Petroleum products are being transported by rail from Azerbaijan to Armenia for the first time in decades. The move is hailed as a tangible breakthrough in efforts to normalise relations between the long-time rivals.
European Union foreign policy chief Kaja Kallas has warned that attempts to reach a peace agreement in Ukraine are being undermined by Russia’s continued refusal to engage meaningfully in negotiations.
U.S. President Donald Trump delivered a wide-ranging address from the White House in which he sought to highlight what he described as his administration’s achievements while laying the groundwork for his plans for the year ahead and beyond, on Wednesday (18 December).
A rare pair of bright-green Nike “Grinch” sneakers worn and signed by the late NBA legend Kobe Bryant have gone on public display in Beverly Hills, ahead of an auction that could set a new record for sports memorabilia.
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Ford Motor Company said on Monday it will take a $19.5 billion writedown and scrap several electric vehicle (EV) models, marking a major retreat from its battery-powered ambitions amid declining EV demand and changes under the Trump administration.
Iran has rolled out changes to how fuel is priced at the pump. The move is aimed at managing demand without triggering public anger.
U.S. stock markets closed lower at the end of the week, as investors continued to rotate out of technology shares, putting pressure on major indices.
The U.S. Federal Reserve’s Federal Open Market Committee (FOMC) cut its benchmark interest rate by 25 basis points to a range of 3.50% to 3.75% following its two-day policy meeting, according to an official statement issued on Wednesday, 10 December.
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