The ECB acknowledged that global trade tensions are likely to weigh on investment and exports in the near term.

The European Central Bank cut its deposit rate to 2.0% on Thursday, marking its eighth reduction in a little over a year and signaling a potential pause ahead in its easing cycle. 

The latest move lowers the deposit rate from 2.25% and places rates firmly in what the ECB considers a "neutral" range, implying neither stimulation nor restraint of economic growth.

Since launching its rate-cutting campaign a year ago, the ECB has reduced borrowing costs by a full two percentage points to lift the economy, which had shown signs of stagnation even before external shocks, such as President Donald Trump’s tariff threats, intensified.

"The Governing Council is not pre-committing to a particular rate path," the ECB said on Thursday. "Interest rate decisions will be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission."

The central bank also adjusted other key lending rates. The weekly refinancing rate was lowered to 2.15% from 2.40%, and the overnight marginal lending rate was brought down to 2.40% from 2.65%.

Despite improved inflation dynamics, including slowing service-sector price growth, uncertainty remains elevated. The ECB acknowledged that global trade tensions are likely to weigh on investment and exports in the near term. 

"While the uncertainty surrounding trade policies is expected to weigh on business investment and exports, especially in the short term, rising government investment in defense and infrastructure will increasingly support growth over the medium term," the central bank said.

Last week, ECB President Christine Lagarde argued that the euro could gain international clout if EU governments strengthen the bloc’s fiscal and security framework. 

“The ongoing changes create the opening for a ‘global euro moment,’” she said. “The euro will not gain influence by default—it will have to earn it.”

U.S. President Donald Trump has been pushing the Federal Reserve to make similar cuts. On Wednesday, he renewed his attacks on Fed Chair Jerome Powell, stating, “‘Too Late’ Powell must now LOWER THE RATE,” in a post on Truth Social after private payroll data showed the weakest job creation in more than two years. 

U.S. markets remained flat in pre-market trade on Thursday. The SPDR S&P 500 ETF Trust (SPY) edged 0.06% higher, while the Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100, gained 0.05%.

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