Thu, 05 Jun 2025

Thu, 05 Jun 2025 Europe cuts interest rates as Trump's tariffs loom

The eurozone's central bank makes its eighth cut but warns US tariffs will weigh on the economy.

* The European Central Bank (ECB) has cut its key interest rate by 0.25% to 2% for the eighth time in just over a year.
* The move is aimed at combating the impact of Donald Trump's tariffs on the eurozone economy, which has been sluggish despite inflation easing across the region.
* The ECB warned that trade uncertainty would weigh on business investment and exports in the short-term, but expects economic growth to pick up in the medium-term due to European spending on defence and infrastructure.
* The US has imposed 50% tariffs on EU steel and aluminium imports, while the EU has drawn up a list of tariffs on $21bn-worth of US goods.
* Inflation across the eurozone fell to 1.9% in April, below the ECB's target of 2%, but is expected to stay around the target between 2025 and 2027.
* The ECB's president Christine Lagarde said that higher incomes and a "robust" employment market would help households spend more and make the economy more resilient to global shocks.
* However, she admitted that trade policies remain a major source of uncertainty for the economy.
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