ECB President Christine Lagarde admitted that confidence in the eurozone outlook was “a bit far-fetched” even as the European Central Bank cut its main interest rate to 2%. This marks the eighth quarter-point reduction in a year, aimed at bolstering flagging growth amidst significant global uncertainty and trade conflicts.
The 20-member currency bloc has experienced a noticeable slowdown in economic activity, with major economies facing subdued growth and a weak outlook for the coming year. The rate cut is intended to make borrowing more affordable, thereby stimulating investment and consumption across the region.
The ECB’s decision was also prompted by eurozone inflation falling below its 2% target. While acknowledging the negative impact of trade tariffs, the central bank anticipates that increased government spending on defense will provide some economic support. Lagarde, while cautious about the “significant uncertainty” in the global economy, highlighted the resilience of the labor market and robust private sector balance sheets as crucial factors in navigating the current environment.