NewsEuropean Central Bank cuts interest rates to 2%

European Central Bank cuts interest rates to 2%

The European Central Bank (ECB) has lowered interest rates to 2%, marking the eighth adjustment to rates this year. The decision has been motivated by uncertainty of the current global situation and pessimism regarding the eurozone’s economic prospects amidst trade war with the US.

Christine Lagarde, president of the European Central Bank (ECB), at a rates decision news conference in Frankfurt, Germany, on Thursday, June 5, 2025. The ECB lowered interest rates for the eighth time in a year after inflation dipped beneath 2% and the economy suffered repeated blows from US tariffs. Photographer: Alex Kraus/Bloomberg via Getty Images
Christine Lagarde, president of the European Central Bank (ECB), at a rates decision news conference in Frankfurt, Germany, on Thursday, June 5, 2025. The ECB lowered interest rates for the eighth time in a year after inflation dipped beneath 2% and the economy suffered repeated blows from US tariffs. Photographer: Alex Kraus/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 defence 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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