The cost of borrowing fell across the 20-member euro area for the third time this year on Thursday when the European Central Bank cut its main interest rate to 2.25% in response to slowing growth and Donald Trump’s tariffs.
The Frankfurt-based bank cut its benchmark deposit rate by a quarter of a percentage point, in line with City economist expectations, to tackle a slowdown in the bloc and the impact from the border taxes imposed earlier this month on all EU imports into the US.
Financial markets expect central banks in all major economies to cut interest rates this year as tariffs hit global trade and slow growth.
Investors expect the Bank of England to cut the cost of borrowing by a quarter point when policymakers next meet in May and twice more in 2025, mostly as a result of uncertainty caused by tariffs and their negative effect on business and consumer confidence.
Jerome Powell, the head of the Federal Reserve, said on Wednesday that US tariffs on about 60 countries would increase domestic prices and reduce hiring.
Speaking at the Economic Club of Chicago said it was unclear what the overall impact would be on the economy and whether the bank would need to raise interest rates to tame inflation or cut rates to boost growth.
“We would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close,” Powell said, triggering a large share sell-off on US markets.
Data released by the EU agency Eurostat showed that inflation in the eurozone rose 2.2% in March, compared with 2.3% in February. A measure of core inflation, which excludes volatile items such as petrol and food, dropped from 2.6% to 2.4% in the same period.
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