The European Central Bank is engaged in a clear battle against economic slowdown, having cut its main interest rate to 2% for the eurozone. This marks the eighth quarter-point reduction in a year, demonstrating the central bank’s aggressive strategy to counteract the flagging growth primarily driven by global trade disputes.
The 20-member currency bloc has experienced a significant deceleration in economic activity, with particularly acute slowdowns observed in its major economies. 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 also foresees some support from increased government investment in areas like defense. ECB President Christine Lagarde, while expressing caution, highlighted the resilience of the labor market and private sector balance sheets as key strengths in this ongoing battle.