{"id":88692,"date":"2025-03-21T08:02:44","date_gmt":"2025-03-21T08:02:44","guid":{"rendered":"https:\/\/tin.happy-projects.ro\/ecb-warns-that-trade-war-risks-hurt-european-economy\/"},"modified":"2025-09-19T09:03:56","modified_gmt":"2025-09-19T09:03:56","slug":"ecb-warns-that-trade-war-risks-hurt-european-economy","status":"publish","type":"post","link":"https:\/\/www.timberindustrynews.com\/ro\/ecb-warns-that-trade-war-risks-hurt-european-economy\/","title":{"rendered":"ECB warns that trade war risks hurt European economy"},"content":{"rendered":"

The European Central Bank (ECB) has made another interest rate cut, responding to heightened concerns over trade war risks that are weighing heavily on the region's economic outlook.<\/span><\/p>\n

The Frankfurt-based institution reduced its benchmark deposit rate by a quarter percentage point, bringing it down to 2.5%, as President Donald Trump readies new tariffs targeting EU exports. This marks the second interest rate cut of the year, aligning with market expectations, amid growing fears of a trade war escalating between the U.S. and the European Union.<\/p>\n

Christine Lagarde, ECB President, pointed to \u201chigh levels of trade and policy uncertainty,\u201d highlighting these factors as key contributors to a downgraded economic growth forecast for the region in 2025.<\/p>\n

Despite these negative pressures, there was a glimmer of optimism on inflation. The ECB reported that inflation is slowing, and the disinflation process is progressing as expected. \"Inflation has continued to develop broadly as staff had anticipated, and the latest projections align with previous inflation forecasts,\" the central bank said in a statement.<\/p>\n

However, the ECB lowered its growth projections for the coming years, reflecting ongoing challenges in both exports and investment. \"The economy faces continued challenges,\" the ECB warned, as it revised its forecast for 2025 to a modest 0.9% growth rate, down from its prior forecast of 1.1%. The forecasts for 2026 and 2027 were similarly reduced, now standing at 1.2% and 1.3%, respectively.<\/p>\n

On the inflation front, the central bank increased its 2025 inflation forecast slightly, from 2.1% to 2.3%, driven by higher energy prices.<\/p>\n

With a series of rate cuts already made over the past year, the ECB is treading cautiously in its policy approach. ECB officials are reluctant to implement further rate reductions in the near term, especially with the geopolitical landscape remaining unpredictable. Lagarde described the current economic environment as volatile, with daily shifts in factors such as energy prices and inflation expectations complicating forecasting efforts.<\/p>\n

Eurozone inflation showed signs of easing in February, with the headline rate slipping from 2.5% in January to 2.4%, according to Eurostat's preliminary data. Services inflation, a key component of the overall figure, also fell to 3.7%, marking its first drop below 4% since April 2024.<\/p>\n

Still, the ECB remains wary of upward price pressures, particularly from energy prices. Concerns over the ongoing conflict in Ukraine and potential disruptions to energy supply remain major sources of inflation risk, which could hinder efforts to return inflation to the ECB's 2% target by 2026.<\/p>\n

Lagarde warned that any rebound in energy prices could trigger a ripple effect, pushing up food costs and delaying the anticipated stabilization of inflation.<\/p>\n

In terms of specific interest rates, the ECB cut its main refinancing rate to 2.65%, while the marginal lending facility rate, the charge banks pay for overnight borrowing, was reduced to 2.90%. The central bank emphasized that its interest rate policy had become \"meaningfully less restrictive,\" signaling that future rate cuts would likely be more gradual and may not come until summer 2025 at the earliest.<\/p>\n

The ECB also finds itself under pressure from rising government borrowing costs within the eurozone, as defense spending commitments grow. German political leaders are calling for greater fiscal flexibility to fund defense initiatives, while the European Commission recently unveiled a five-part plan to support the defense sector, including loans and private capital mobilization. This has led to a spike in borrowing costs for Germany, Italy, and France, complicating efforts to balance budgets.<\/p>\n

Mark Wall, Deutsche Bank's Chief European Economist, noted the ECB's challenging position in balancing the risks of further rate cuts with the need to support increased defense spending. He added that the central bank would need to navigate these pressures carefully to maintain growth while avoiding a resurgence of inflation.<\/p>\n

As the ECB faces a delicate balancing act, all eyes are on how its future rate decisions will play out in the face of trade tensions, geopolitical risks, and mounting defense spending across Europe.<\/p>","protected":false},"excerpt":{"rendered":"

The European Central Bank (ECB) has made another interest rate cut, responding to heightened concerns over trade war risks that are weighing heavily on the region’s economic outlook. 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