ECB cuts interest rates by quarter as tariff turmoil looms

The European Central Bank's rate-setting council on Thursday cut the institution's benchmark rate a quarter-point to 2.25% amid continued worries about growth.

The reduction — the seventh straight cut in a year— comes amid increased uncertainty over US President Donald Trump's now-suspended tariff-widening measures.

The central bank said "rising trade tensions" have hit eurozone growth prospects.

What do we know about the ECB decision?

The bank has been steadily cutting rates since June 2024 after raising them to counter an outbreak of high inflation from 2022 to 2023.

Now that inflation has fallen to a more manageable figure, growth worries have taken precedence.

At the bank's last meeting on March 6, ECB President Christine Lagarde raised the possibility of an upcoming "pause" in the bank's string of rate cuts.

However, that option was effectively eliminated on April 2, when Trump shook global markets with proposals for unexpectedly high new tariffs from 10% to 49% on global trading partners.

While Trump has put most tariffs on hold for 90 days, the possibility of the 20% tariff rate he has proposed for Europe left economists and policymakers spooked that higher costs could drag down business activity.

The economy of the 20 countries that use the euro grew by a mere 0.2% in the last quarter of 2024. Inflation was 2.2% in March, approaching the bank's target of 2% but remaining sticky.

Edited by: Wesley Rahn