ECB cuts benchmark interest rate by 0.25 point in the face of Trump tariffs

The European Central Bank cut its benchmark interest rate for an eighth time, aiming to support businesses and consumers with more affordable borrowing as US president Donald Trump's trade war threatens to slow already tepid growth.

The bank's rate-setting council cut interest rates by a quarter of a point on Thursday, 5 June, at the bank's skyscraper headquarters in Frankfurt.

Analysts expected a cut, given the gloomier outlook for growth since Trump announced a slew of new tariffs on 2 April and subsequently threatened to impose a crushing 50 per cent or import tax on European goods.

The bigger question remains how far the bank will go at subsequent meetings.

Bank president Christine Lagarde's remarks at a post-decision news conference are being scrutinised for hints about the bank's outlook.

Thursday's decision took the bank's benchmark rate to 2 per cent, down from a peak of 4 per cent in 2023–24.

The bank raised rates to suppress an outbreak of inflation in 2021–23 that was triggered by Russia's invasion of Ukraine and by the rebound from the pandemic.

But as inflation fell, the bank shifted gears toward supporting growth by lowering rates.

With inflation now down to 1.9 per cent, below the bank's target of 2 per cent, analysts say the bank has room to take rates even lower to support growth.