European Central Bank expected to cut interest rates for seventh time in a year
The European Central Bank is widely expected to cut interest rates by one-quarter of a percentage point later today.
The development follows the latest inflation figures, for countries that use the euro, showing prices rose by 2.2% in March, down 0.1% on the February rate.
It means the rise in the cost of living is approaching the ECB’s target of 2%, leaving the door open to reduce interest rates.
If the bank proceeds with a quarter of a percentage point cut it would reduce its main rate from 2.5% to 2.25%.
The ECB has made six quarter-point cuts since last June as inflation has fallen, bringing its benchmark deposit rate down to 2.5% from 4%.
The cut would immediately benefit tracker mortgage customers and put downward pressure on other rates.
The decision on rates, expected this afternoon, will be followed by an ECB press conference.
There will be a lot of attention on comments by the bank’s President Christine Lagarde regarding economic disruption caused by US tariffs and what it means for the eurozone.
The ECB’s decision regarding rates comes in a much more complicated environment after significant falls on stock markets, a drop in the value of the dollar, and alarm in the bond market after the cost of borrowing rose for the United States.
The uncertainty around US President Donald Trump’s next move, and the negative impact it could have on growth within the single currency bloc, has intensified calls for the bank to ease borrowing costs further.
Going into the ECB meeting, policymakers could not be sure what US tariff rates would eventually apply to transatlantic trade.
For now, President Trump has rowed back on his initial decision to hit all European Union imports with a basic 20% levy, which could rekindle inflation.
But the White House has also imposed 25% levies on the automotive, steel and aluminium sectors, and opened investigations into semiconductors and pharmaceuticals that could lead to more industry-specific tariffs.
Last week, Ms Lagarde signalled policymakers’ willingness to support the eurozone in a more critical scenario, saying the ECB “is always ready to use the instruments that it has available”.