World NewsECB cuts interest rates to 2% amidst markets uncertainty

ECB cuts interest rates to 2% amidst markets uncertainty

The European Central Bank (ECB) has cut interest rates to 2%, representing the eighth change to rates this year. The decision was driven by global uncertainty and increasing concerns over the eurozone’s economic outlook, especially amid the ongoing trade conflict with the United States.

Christine Lagarde, president of the European Central Bank (ECB), at the Hertie School in Berlin, Germany, on Monday, May 26, 2025." The ongoing changes create the opening for a 'global euro moment," she said Monday. Photographer: Krisztian Bocsi/Bloomberg via Getty Images
Christine Lagarde, president of the European Central Bank (ECB), at the Hertie School in Berlin, Germany, on Monday, May 26, 2025." The ongoing changes create the opening for a 'global euro moment," she said Monday. Photographer: Krisztian Bocsi/Bloomberg via Getty Images
Images source: © GETTY | Bloomberg

"Especially in current conditions of exceptional uncertainty, (the ECB) will follow a data-dependent and meeting-by-meeting approach," stated the bank officials. "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 ECB added.

Thursday’s rate cut reduces the interest the European Central Bank (ECB) pays on bank deposits from 2.25% to 2.0%, a level the ECB considers "neutral," meaning it is neither stimulating nor restraining economic activity, conveyed ECB’s president Christine Lagarde.

ECB maintains that it keeps its options open regarding future changes to interest rates, however several policymakers and investors expect a halt to rate cuts in July, during ECB’s next meeting. 

Christine Lagarde intends to stay

An ECB spokesperson stated last week that Christine Lagarde is committed to serving the full duration of her eight-year term as president of the European Central Bank. This clarification followed a report by the "Financial Times," which claimed that Lagarde had engaged in discussions about potentially stepping down early to take over leadership of the World Economic Forum.

The 69-year-old Paris-born lawyer served as France’s first female finance minister from 2007 to 2011. She took over the ECB in 2019 and faced criticism soon after. Lagarde is said to have unsettled financial markets with remarks concerning the ECB’s strategy for addressing debt crises. Later, she was compelled to steer the bank back into crisis-response mode during the COVID-19 pandemic. Her non-renewable tenure ends in 2027.

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