Europe reduces interest rates while Trump prices are looming

The European Central Bank (ECB) has reduced its key interest rate for the eighth time in just over a year, because it has warned of continuous pressure on the euro area of ​​Donald Trump prices.

The main rate increased from 2.25% to 2% by the ECB, which establishes rates for countries that use the euro.

While inflation was unleashed through the euro zone, the economy was slow even before the American president deploys his aggressive tariff policy which caused threats of larger European Union reprisals.

The ECB said that, in the short term, “uncertainty” surrounding trade “would weigh on investment and commercial exports”.

An “stronger than expected” economic growth of 0.3% between January and March could weaken over the year, said the Central Bank.

Trump on Wednesday dubbed prices on steel and EU aluminum imported in the United States from 25% to 50%.

Trump has interrupted taxes on other European goods sold in the United States until July 9, while talks to conclude an agreement continues, but a 10% rate remains until then.

Meanwhile, the EU has established its own list of prices on 21 billion euros in American goods.

However, the ECB expects the economy to come together in the medium term, stimulated by European defense and infrastructure expenses.

NATO is pressure for the members of the military alliance to engage more funds to strengthen defense in Europe while Russia continues to wage a war against Ukraine.

Recent figures have shown that inflation through the euro zone of 20 members had fallen below the target of 2% of the ECB, standing at 1.9% in April.

Inflation should stay around the target between 2025 and 2027.

The president of the ECB, Christine Lagarde, said Thursday that higher income and a “robust” “job market will allow households to spend more”.

She said that it would help “make the economy more resilient for world shocks”.

However, she admitted that a great uncertainty remained on the economy, largely due to trade policies.

German Chancellor Friedrich Merz will meet Trump at the White House Thursday where they should discuss prices as well as defense expenses.

The pace of the BCE prices discounts praised Trump while provoking his anger against the American federal reserve and its president Jerome Powell.

On Wednesday, the figures of the PAY company ADP revealed that hiring by American companies in May fell to its lowest level in more than two years. Recent figures have also indicated that the US economy has decreased in the first three months of 2025.

Wednesday, Trump wrote on social networks: “ADP Number Out !!!” Too late “Powell must now reduce the rate. It is incredible !!! Europe has lowered nine times!”

At the time, the ECB had reduced interest rates seven times in its last cycle.

The United States Fed has reduced the key interest rate three times.

At the last rate adjustment meeting when the Fed voted to hold, Powell said that the economic benefits of Trump prices meant that it was “not at all” what the bank should do then.

He said that if Trump’s pricing policies remained in place, they were probably “to generate an increase in inflation, a slowdown in economic growth and an increase in unemployment.”

Friday, official statistics of the United States should be released. Economists predict that the United States added 130,000 jobs in May, against 177,000 in the previous month.

The unemployment rate should remain stable at 4.2%.