0 Comment(s)
Print
E-mail Xinhua, April 18, 2025
FRANKFURT, April 18 (Xinhua) -- The European Central Bank (ECB) on Thursday decided to cut key interest rates by 25 basis points, stressing that it has to remain ready and agile at a time when uncertainties are "exceptional."
SEVENTH TIME CUT
It is the seventh time that the ECB has lowered key interest rates since it embarked on a cycle of rate cuts since June last year.
A total of 175 basis points have been knocked off the three key interest rates which were lifted to the highest points by September 2023.
After the cut, the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will be decreased to 2.25 percent, 2.4 percent and 2.65 percent respectively.
According to ECB President Christine Lagarde, the change of monetary policy is aimed at bringing the medium term inflation to its target level of 2 percent sustainably.
The rate cut came as a sharp contrast to the hesitance of the central bank in March when it declined to clarify whether the rate cut would take place in April.
MOUNTING UNCERTAINTIES
Even though "the euro area economy has been building up some resilience against global shocks, but the outlook for growth has deteriorated owing to rising trade tensions," said the ECB in a statement.
The U.S. decision to impose sweeping tariffs and threaten country-specific punitive tariffs has left equity markets reeling, sending a shock wave across the globe.
Increased uncertainty deriving from trade tensions is likely to dent confidence, tighten financing conditions and lead to more market volatility, which may further weigh on the economic outlook for the euro area.
The current "shocks" render it meaningless to assess its current monetary policies, Lagarde told a press conference on Thursday.
It is premature to determine the impact of U.S. trade policies on the inflation outlook in the euro area, according to Lagarde.
With an indirect reference to the erratic U.S. trade policies, Lagarde said predictability, among other factors, is necessary to keep investors confident.
READY TO NAVIGATE MUDDY WATERS
Lagarde stressed that the ECB has to be ready and agile to make its next moves depending on safe and solid data.
The United States is still locked in trade standoff with its trading partners including the EU, which has announced a pause of its retaliatory measures against the United States.
Washington's trade policies have left oil prices and U.S. dollar sliding, adding to the disinflationary pressures of the euro area.
"U.S. tariffs and the never-ending back-and-forth have brought back growth concerns for the euro zone," said Carsten Brzeski, global head of Macro for ING Research, in a note on Thursday.
Brzeski warns that the euro area economy will face the fallout of the trade tensions that may not fade away soon, and the risk for the ECB of undershooting its inflation target will increase.
"The ECB's sense of urgency has clearly increased," Brzeski said, adding that Lagarde's stress of "readiness" and "agility" would be a sign that the ECB is open to more rate cuts. Enditem
Go to Forum >>0 Comment(s)