The European Central Bank (ECB) once again reduced the benefit rate by 25 points, making this the seventh cut in over a year. This step was taken to support the European zone economy which is increasingly affected by global trade tensions and the significant impact of tariffs imposed by the United States.
ECB President Christine Lagarde stated that the decision was made unanimously, and there was no discussion for a larger cut. According to him, the impact of US tariffs on the European zone economy will become clearer over time, but he now views it as a negative demand shock that worsens growth prospects.
Lagarde also warned that global trade disruptions and falling energy prices were putting downward pressure on inflation. In addition, the strengthening of the value of the euro and the increase in exports going to Europe from high capacity countries added further challenges to the economy.
At the same time, ongoing global trade tensions increase risks to economic growth by impacting exports, investment and domestic consumption. Uncertainty in financial markets can reduce risk appetite and make it difficult to access financing for businesses and households.
Finally, Lagarde stressed the immediate need for a comprehensive fiscal policy and structure. According to him, only by increasing competitiveness and economic resilience through structural reform, can the Eurozone face the current extraordinary global economic uncertainty.
