FRANKFURT (Reuters) – The European Central Bank cut interest rates for the sixth time in nine months on Thursday, sticking to its easing plan in the face of economic upheaval from an unfolding trade war and new plans to boost Europe’s military spending.
With inflation closing in on its 2% target, the central bank for the euro zone lowered the rate it pays on bank deposits by 25 basis points to 2.5% a level it saw as “meaningfully less restrictive”.
“Monetary policy is becoming meaningfully less restrictive, as the interest rate cuts are making new borrowing less expensive for firms and households and loan growth is picking up,” the ECB said.
Thursday’s cut was likely the last easy decision for ECB policymakers, with any move from next month onwards set to be subject to a more heated debate as inflation worries linger.
Germany’s move this week to increase military and infrastructure spending, which could stoke fresh inflationary pressures, is likely to heighten those concerns.
On the flip-side, the euro zone economy may take a hit if the United States follows through with plans to slap “reciprocal tariffs” on every country that taxes U.S. imports.
ECB President Christine Lagarde is likely to be asked about these risks at a press conference starting at 1345 GMT.
With Thursday’s cut, the ECB also lowered by 25 basis points the rates at which banks can borrow at its weekly and daily auctions, to 2.65% and 2.90% respectively.
(Reporting By Francesco Canepa; Editing by Catherine Evans)
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