synopsis

The central bank acknowledged that the euro area economy has been building up some resilience against global shocks, but the growth outlook has deteriorated due to rising trade tensions.

The European Central Bank (ECB) slashed its interest rates for the seventh consecutive time since June as the ongoing tariff wars threaten to take a toll on the economies in the region.

The deposit rate, which the Governing Council uses to steer the monetary policy stance, was reduced by 25 basis points to 2.25%. The ECB said that this is based on its updated assessment of the inflation outlook, the dynamics of underlying inflation, and the strength of monetary policy transmission.

The central bank acknowledged that the euro area economy has been building up some resilience against global shocks, but the growth outlook has deteriorated due to rising trade tensions.

“Increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions. These factors may further weigh on the economic outlook for the euro area,” the central bank stated.

At the same time, the Governing Council asserted that it is not pre-committing to a particular rate path and will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance.

The ECB also reduced the interest rates on the main refinancing operations and the marginal lending facility by 25 bps each to 2.40% and 2.65% respectively, with effect from April 23, 2025.

According to the central bank, the disinflation process is well on track, and most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-term target on a sustained basis.

On Wednesday, Federal Reserve Chair Jerome Powell said in his speech at The Economic Club of Chicago that the central bank is well-positioned to wait for greater clarity before considering any adjustments to its monetary policy stance.

“We continue to analyze the incoming data, the evolving outlook, and the balance of risks. We understand that elevated levels of unemployment or inflation can be damaging and painful for communities, families, and businesses,” Powell said in his opening remarks.

Meanwhile, the SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500, rose 0.72% in Thursday’s pre-market session, and the Invesco QQQ Trust, Series 1 (QQQ), which follows the Nasdaq Composite, gained 0.99%.

For updates and corrections, email newsroom[at]stocktwits[dot]com.<