The central base rate is decreasing to 2.25%. With that, the European Central Bank (ECB) is reacting to the American tariffs which risk having negative impacts on the European economy. Looking at inflation separately, the developments show the economy is improving. However, times are extremely unstable, underscores head of ECB Christine Lagarde.
The market had anticipated this decline, so it didn’t come as a major surprise. Gaston Reinesch, governor of the Luxembourg Central Bank (BCL), commented on the matter: “Perhaps now is not the right time for surprises in financial markets – they already have enough challenges to address. In that sense, it was beneficial for the European Central Bank to move in line with expectations. It contributes to a sense of stability and reinforces trust in our monetary policies.”
Adding to the instability of international markets, Gaston Reinesch notes that a new decision could be made at any time. As a result, they can only monitor the rate developments as they unfold from one meeting to the next.
The ECB is committed to further supporting price stability and acting ‘nimbly’ while urging the remaining European institutions to do their part.
Paradoxically, as trust in the United States wanes, the current moment is in Europe’s hands, states the governor of the BCL, echoing a point previously made by Christine Lagarde.
Europe must now take the lead on the digital euro, the Capital Markets Union, and in enhancing economic competitiveness. The key to this is the Draghi Report. This report outlines recommendations to strengthen the economic and financial integration of the European Union, particularly focusing on the Capital Markets Union, digital currency, and enhancing Europe’s global competitiveness.
