Europe slashes interest rates in wake of trade war

Eurozone drops official interest rates by quarter-percent

Lola Evans
17 Apr 2025, 19:36 GMT+10

Europe slashes interest rates in wake of trade war

The ECB, as expected, reduced the official rate by 25 basis points, from 2.50 percent to 2.25 percent.
"The economic outlook is clouded by exceptional uncertainty. Euro area exporters face new barriers to trade, although their scope remains unclear."
"Unemployment fell to 6.1 per cent in February, its lowest level since the launch of the euro."

BRUSSELS, Belgium - The Europesn Central Bank has slashed official interest rates in the wake of the financial crisis triggered by U.S. trade tariffs.

The ECB, as expected, reduced the official rate by 25 basis points, from 2.50 percent to 2.25 percent.

"The economic outlook is clouded by exceptional uncertainty. Euro area exporters face new barriers to trade, although their scope remains unclear," Christine Lagarde, the European Central Bank President, said at a press conference following a meeting of the bank's Governing Council.

"Disruptions to international commerce, financial market tensions and geopolitical uncertainty are weighing on business investment. As consumers become more cautious about the future, they may hold back from spending as well."

"At the same time, the euro area economy has been building up some resilience against the global shocks. The economy is likely to have grown in the first quarter of the year, and manufacturing has shown signs of stabilisation," Lagarde said.

"Unemployment fell to 6.1 per cent in February, its lowest level since the launch of the euro. A strong labour market, higher real incomes and the impact of our monetary policy should underpin spending."

"The important policy initiatives that have been launched at the national and EU levels to increase defence spending and infrastructure investment can be expected to bolster manufacturing, which is also reflected in recent surveys," the ECB president said.

The euro weakened to 1.1359 shortly after Lagarde's press conference, in late afternoon trading Thursday, after having hit a high of 1.1409 earlier in the day.