Summary
Highlights
The European Central Bank's Governing Council has decided to lower interest rates by 25 basis points, bringing the reference rate down to 2%. This is the eighth such reduction since June 2024, demonstrating a consistent effort to adjust monetary policy.
This decision is primarily based on stable inflation, which remains in line with the target of 2% in the medium term. Inflation is projected to stay near 2% in the coming years. Economic growth for 2025 is forecast at 0.9%, with a slight revision for next year to 1.1%.
Several factors are affecting economic growth. Challenges include increased tariffs on U.S. imports, high uncertainty impacting household and business confidence, and the recent appreciation of the Euro. Conversely, strong first-quarter data from increased exports to the U.S. (ahead of tariff increases) and planned public spending on defense and infrastructure are boosting activity.
Geopolitical and trade tensions remain a concern, potentially impacting both growth and inflation. The ECB is prepared to act if necessary, committed to its mandate of maintaining price stability for solid economic growth in the Euro area. They will closely monitor economic and financial data to inform future decisions, particularly regarding trade conflicts.