The European Central Bank (ECB) lowered its main interest rate by 0.25% to 2.25% amid escalating global trade tensions fueled by U.S. tariffs, marking its seventh cut in a year. The ECB warned that trade disruptions, financial market strains, and geopolitical uncertainty are dampening business investment and consumer confidence, potentially stalling economic growth. This move aligns with concerns raised by institutions like the IMF, WTO, and the U.S. Federal Reserve, which caution that tariffs could harm global economies.
Yael Selfin of KPMG highlighted risks of a manufacturing surplus and deflation due to snarled trade flows. Meanwhile, the U.S. Federal Reserve has paused rate hikes, with Chair Jerome Powell emphasizing tariffs’ negative impact on the economy. Former President Trump criticized Powell for inaction, demanding his removal, while ECB President Christine Lagarde defended Powell and stressed the necessity of central bank independence, particularly for eurozone members. The ECB’s decision underscores divergent monetary policies and the broader economic strain from trade conflicts, alongside political tensions over central bank autonomy.
Source: CNN
