European Central Bank Expected to Cut Interest Rates Amid US Trade War

The European Central Bank (ECB) is widely expected to cut interest rates again amid slowing inflation and concerns about the impact of U.S. President Donald Trump's trade tariffs on Europe's export-dependent economy. Inflation in the eurozone dropped below the ECB's 2% target to 1.9% in May, creating room for an eighth rate cut since mid-2024, potentially lowering the benchmark rate to 2%. Trump's imposition of tariffs, including a 20% levy on EU goods and a sudden increase of steel tariffs to 50%, has raised fears of slower growth and pressured the ECB to ease borrowing costs to support the economy. Market analysts suggest that while the ECB is poised for another cut, there is debate about whether further reductions will follow soon, with some anticipating a pause after reaching a 'neutral interest rate.' ECB President Christine Lagarde faces questions about the economic outlook and her tenure, but the institution remains focused on balancing growth support with inflation risks amid ongoing trade tensions. Unlike the ECB, the U.S. Federal Reserve has maintained steady rates, wary that Trump's tariffs could stoke inflation in the U.S.