ECB Considers Further Rate Cuts Amid Rising Risks

The European Central Bank (ECB) is considering further interest rate cuts to reach a neutral rate of about 2%, as suggested by Governing Council member Yannis Stournaras, to avoid economic stimulation or restriction. Rising global trade tensions, particularly from potential US tariffs, pose significant risks to the euro area economy, as highlighted in the ECB's Financial Stability Review. The ECB is also concerned about the eurozone's sluggish growth, surging borrowing, and political instability, particularly in France, which could lead to a debt crisis. ECB board member Piero Cipollone emphasized the importance of reducing interest rates to support economic recovery and prevent permanent economic damage by avoiding excessively high borrowing costs. The central bank recognizes the potential impact of protectionist US trade policies and is prepared to adjust its monetary policy accordingly. Investors anticipate further rate cuts at the ECB's upcoming meetings to address these challenges.