The European Central Bank (ECB) lowered its rates on Thursday, April 17, for the sixth time in a row, hoping to counter the effect of trade tensions exacerbated with the United States, which threaten growth in the euro zone. The deposit rate, which refers, was lowered by 25 base points, to 2.25 %, a level which is no longer deemed to be penalizing for the economy, according to the institution chaired by Christine Lagarde.
This seventh drop in the rent for money since June 2024 has occurred after the announcement of surcharge “Converse” At the beginning of April by Donald Trump who made the economic situation more uncertain. If the economy of the euro zone has developed “A certain resilience to the world shocks”growth prospects “Have deteriorated due to the intensification of trade tensions”explain The coBCE mmunicated.
These tensions and the unpredictable nature of Donald Trump's decisions could have “Severe negative consequences”warned the Director of the World Trade Organization (WTO), Ngozi Okonjo-Iweala on Wednesday. In this uncertain context, the institution is careful not to anticipate its next decisions: it will continue to rely on ” data “ For “Determine, meeting by meeting”the orientation of monetary policy.
If the slowdown in global trade is confirmed, observers are betting on other rate drops to follow, some going so far as to consider a deposit rate reduced to 1.75 % in the coming months.
Reciprocal customs duties
Since June 2024, the ECB has lowered its rates seven times, reversing a monetary tightening cycle that started two years earlier to fight against inflation caused by the Russian war in Ukraine and its energy repercussions.
During their last meeting, in March, the Euro guards suggested that they did not exclude a break in this rate of drop in rates. The eyes were then riveted on the announcement of the massive budget recovery plan in Germany and on the increase in military budgets in Europe, revealing higher growth and inflation in the medium term. But the external shock of a trade war has rebuilt the cards, pushing the ECB to react without delay the next macroeconomic forecasts of June.
In early April, Donald Trump imposed reciprocal customs duties on all countries – 10 % universal and up to 145 % additional on China – with some sectoral exemptions. A 90 -day break was then decreed for surcharge greater than 10 % on countries outside China, but that was not enough to reassure the markets. Europe is directly targeted: the automotive sector undergoes a 25 %tax, while semiconductors and pharmaceutical products are now under survey.
Financial stability
The President of the American Federal Reserve (Fed), Jerome Powell, said Wednesday that customs duties would lead to “Most certainly a temporary increase in inflation” in the United States. Donald Trump, for his part, criticized the Fed boss on Thursday, believing that he should have lowered the rates “For a long time already, like the ECB”.
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In Frankfurt, the headquarters of the ECB, the concerns concerning the increase in prices have passed in the background: the disinflation is “On the right track”according to its press release, with inflation in the twenty member countries of the euro zone which established 2.2 % in March approaching the target of 2 %.
In a heckled climate, financial stability becomes a priority again: the dollar bends over the euro, the yields of US treasury bills are climbing, and the global financial markets remain under tension.
“The ECB monitors the situation closely and remains ready to intervene if necessary”said mme Lagarde last week in Warsaw, on the sidelines of a meeting of finance ministers in the euro zone.
A sub -tension financial system – weakened banks, heckled markets – can quickly stop investment and consumption, at the risk of sliding the economy towards deflation. A scenario reminiscent of 2008, when the global financial crisis had suddenly dropped inflation, then causing the sovereign debt crisis, and pushing the BCE to release its arsenal of exceptional measures.
Source: Lemonde