Despite a single dissenting vote, the European Central Bank has cut its main interest rate to 2%, reflecting a strong consensus to bolster flagging eurozone growth. This marks the eighth quarter-point reduction in a year, underscoring the broad agreement within the central bank on the need for decisive action against the economic fallout from global trade conflicts.
The 20-member currency bloc has experienced a noticeable slowdown in economic activity, with particularly acute slowdowns observed in France, Germany, and Italy. The pessimistic forecasts for the upcoming year have intensified the pressure on the central bank to make borrowing more affordable and stimulate investment.
The ECB’s decision also coincided with a fall in eurozone inflation below its target. While acknowledging the detrimental effects of trade policies, the central bank also foresees some support from increased government investment in areas like defense. ECB President Christine Lagarde noted that the vote to cut rates was “virtually unanimous,” reinforcing the collective will behind the decision.