European Central Bank cuts interest rates for 7th time in a row amid global trade tension

The cut was widely expected by analysts given the sudden shadow cast by Trump’s April 2 announcement of unexpectedly high tariffs

Reading Time:2 minutes

The headquarters of the European Central Bank in Frankfurt. Photo: AFP

Published: 8:42pm, 17 Apr 2025Updated: 1:06am, 18 Apr 2025

The European Central Bank cut interest rates Thursday for the seventh time in a row to counter worries about economic growth fuelled by US President Donald Trump’s tariff onslaught.

The bank’s move should support economic activity in the 20 countries that use the euro currency by making credit more affordable for consumers and businesses.

ECB president Christine Lagarde said at a post-decision news conference that “the major escalation in global trade tensions and the associated uncertainty will likely lower euro area growth by dampening exports”.

“And it may drag down investment and consumption,” she said.

The bank’s rate-setting council decided at a meeting in Frankfurt to lower its benchmark rate by a quarter percentage point to 2.25 per cent. The bank has been steadily cutting rates after raising them sharply to combat an outbreak of inflation from 2022 to 2023.

European Central Bank president Christine Lagarde addresses the media at the ECB headquarters in Frankfurt on Thursday. Photo: Reuters

Now that inflation has fallen, growth worries have taken centre stage. The economy in the 20 countries that use the euro grew a modest 0.2 per cent in the last three months of 2024. Inflation was 2.2 per cent in March, close to the bank’s target of 2 per cent.