ECB cuts rate again as eurozone falters, with eye on Trump

FRANKFURT: The European Central Bank made a fresh interest rate cut Thursday as inflation eases and the eurozone economy flatlines, with a nervous eye on US President Donald Trump’s protectionist agenda.

The central bank cut its benchmark deposit rate by a further quarter point to 2.75 percent on Thursday, its fifth reduction since June last year and a move widely expected by observers.

The ECB’s decision stands in contrast to the latest move by the US Federal Reserve.

The central bank in the United States, whose economy has been outpacing the eurozone’s, on Wednesday left its key lending rate unchanged and said it was in no “hurry” to make changes, despite pressure from Trump for more cuts.

The ECB had previously hiked borrowing costs aggressively to tame runaway energy and food costs, but is now bringing them back down as price rises slow and the eurozone economy falters.

A recent uptick in inflation — which rose to 2.4 percent in December, above the ECB’s two-percent target — has caused some jitters.

But policymakers believe price pressures will ease during 2025, and their focus has shifted to relieving the strain on the beleaguered 20-nation eurozone.

Data released before the ECB’s meeting showed the eurozone economy registered zero growth in the final quarter of 2024, dragged down by contractions in heavyweights France and Germany, despite expectations for a slight expansion.