Facing more headwinds from tariffs implemented by Washington, which has created widespread uncertainty and spurred fears about euro zone's economic growth, ECB made another 25bp cut in response to deteriorated growth outlook.
The rate cut was fully priced in by the markets ahead of the decision. In policy statement, ECB indicated that growth outlook has deteriorated owing to rising trade tensions; also increased uncertainty is likely to reduce confidence among households and businesses, and extremely volatile markets response to trade tensions is having significantly tightening impact on financial conditions.
The flip-flopping tariffs development is the main reason for ECB to cut rates. Even though the initial duties imposed by Washington, as well as the retaliatory measures have been put on ice, concerns around how they ultimately affect economic outlook have been rife.
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