The European Central Bank has cut its main interest rate to 2%, aiming for medium-term growth by combining monetary easing with a projected boost from infrastructure investment. This marks the eighth quarter-point reduction in a year, signaling the central bank’s strategic vision for the eurozone’s economic future amidst global trade conflicts.
The 20-member currency bloc has experienced a significant 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 explicitly stated that rising government investment in infrastructure would increasingly support growth over the medium term, alongside defense spending. ECB President Christine Lagarde, while expressing caution, highlighted the resilience of the labor market and private sector balance sheets as key strengths.