The European Central Bank has aggressively cut its main interest rate to 2%, placing it significantly below the rates set by its counterparts in the UK and US, in a bid to bolster flagging eurozone growth. This marks the eighth quarter-point reduction in the past year, signaling the ECB’s strong commitment to mitigating the economic impact of global trade wars.
The 20-member currency bloc has experienced a notable slowdown in economic activity, particularly in its largest economies. The pessimistic forecasts for the upcoming year have intensified the pressure on the central bank to make borrowing more affordable and stimulate investment.
The ECB’s decision was also influenced by a recent dip in eurozone inflation below its target. While trade uncertainties are a primary concern, the central bank anticipates that increased government spending on defense will provide some economic support. ECB President Christine Lagarde, while expressing caution, highlighted the resilience of the labor market and robust private sector finances as key strengths.