ECB Cuts Interest Rates to 2% Among Market Uncertainty Across Europe

The European Central Bank (ECB) has cut its key interest rates by 25 basis points, lowering the main refinancing rate to 2.15% and the deposit rate to 2.00%, marking the eighth reduction since 2023 as part of its strategy to support economic growth amid concerns over a slowdown and inflation. ECB President Christine Lagarde indicated the bank is nearing the end of its monetary policy easing cycle but cautioned that challenges remain, including compounded shocks from Covid, the war in Ukraine, and the energy crisis. The rate cut has bolstered European stocks, with mixed market reactions and investor optimism supported by factors such as Germany's tax relief and expectations for further ECB easing. This move is accelerating a global shift of investor interest away from U.S. assets, as concerns mount over America's fiscal deficits, rising debt, and geopolitical risks from trade tensions under President Donald Trump’s administration. The US dollar has weakened recently, and investors are diversifying portfolios in response to growing uncertainties in the U.S. market, while European markets remain sensitive to global trade developments and upcoming economic data. Overall, the ECB's decision reflects a cautious but proactive approach to balancing growth and inflation risks in a complex international economic environment.