17.04.25 - ECB cuts interest rates

As fully anticipated by markets, the European Central Bank (ECB) made another 25 basis points interest rate cut today, lowering the key rate to 2.25%.
At the same time the ECB warns of a deteriorated growth outlook on trade tensions.

Already yesterday evening, Fed chairman Jerome Powell warned of a challenging scenario.

Markets: After yesterday’s sell-off in the US, European stock indices down around 0.5%, the Euro trading lower with interest rates moving lower, gold slightly lower after yesterday’s record high with the price remain well above USD 3’300.

My view: The seventh consecutive interest rate cut by the ECB had no immediate market impact, as it was fully anticipated. With inflation showing signs of stabilization, the central bank was able to proceed confidently with this move. Attention now shifts to the upcoming press conference and any forward guidance that may be offered.

Central banks continue to signal their readiness to act in the event of market turbulence. However, last week’s rapid sell-off in US Treasuries underscores how quickly sentiment can shift. As trade tensions persist, central banks remain on high alert.

The Federal Reserve now finds itself in a similarly delicate position to that of the ECB in recent months. Persistent inflation is keeping the Fed from cutting rates, despite mounting signs of a slowing economy that would otherwise warrant more accommodative policy.

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