ECB Trims rates: lower benchmark rates with 25 BPS in the midst of Trump rate risks; Growth Path now depends on trade discussions – Times of India

The European Central Bank reduced its most important interest on Thursday by 25 basic points, stating the growing uncertainty of American trading threats and delaying the momentum of the euro zone.In its eighth consecutive rate reduction, the ECB reduced its benchmark percentage to 2%, at a recent highlight of 4%, because policy makers try to dampen the eurozone economy of the consequences of renewed trade tensions and slow domestic demand.The decision of the rates, announced at the Frankfurt headquarters of the ECB, comes after the US President Donald Trump has imposed new rates on European goods and threatened to increase them sharply without a trade progress. Analysts had generally expected a rate reduction, but uncertainty remains about how far the central bank will go in future meetings.According to the Associated Press, ECB President Christine said reporters that upcoming monetary policy movements would be highly dependent on geopolitical developments and the outcome of ongoing commercial negotiations. “A further escalation in global trade tensions and associated uncertainties can lower the growth of the euro areas by dampening exports and draging investments and consumption,” she said. “If trade and geopolitical tensions were quickly resolved, this could eliminate sentiment and encourage the activity.“Lagarde added that higher defense and infrastructure expenditures, together with productivity-promoting reforms, can also support growth. European governments have performed military purchasing in response to the Russian war in Ukraine, partly in the midst of concern that the US may withdraw from its dedication to support Kiev.Despite Thursday’s move, Lagarde said that the ECB “did not stay on a certain tariff path”, which reflects the liquid views for both inflation and growth.The ECB had previously increased the rates in 2021-23 to control post-Pandemic inflation that was aggravated by the conflict in Ukraine. With inflation now at 1.9%, just below the target of 2%, the bank sees room to offer stimulus through cheaper credit.During the press conference, Lagarde also rejected speculation from a Financial Times report that she could leave her role early to lead the World Economic Forum in Davos. “I can tell you very firmly that I have always been and I am determined to deliver my mission, and I am determined to complete my period,” she said. “So I regret telling you that you are not about to see the back of me.” Her term of office as an ECB president runs until October 31, 2027.Trump’s recent movements have markets and policy makers in the block of rattling. The US president imposed a rate of 20% on EU goods and later threatened to double it to 50%, with reference to slow progress in conversations with the EU Executive Commission. Although both parties have agreed to adjust the implementation and retribution until July 14, the break can be of short duration if the negotiations gets stuck.Trump separately raised steel rates this week of 25% to 50% for all countries except the UK, which intensifies the concern of a broader delay in global trade.The European Commission has already revised its growth food spelling of 2025 for the region to 0.9%, of 1.3%, based on the assumption that the 20%American rate can be negotiated to no more than 10%.