FRANKFURT (Reuters) – The European Central Bank cut interest rates as expected on Thursday and kept more easing on the table, sticking to its view that inflation in the euro zone is increasingly under control despite concerns about global trade.
The fifth ECB rate cut since June, which had been well telegraphed to the market, lowered the rate that the central bank pays on deposits to 2.75% from 3.0%.
The euro zone economy has remained weak, despite some signs of revival in the latest round of surveys, and inflation has hovered just above the ECB’s 2% target, cementing the case for Thursday’s rate cut.
“The disinflation process is well on track,” the ECB said.
“Domestic inflation remains high, mostly because wages and prices in certain sectors are still adjusting to the past inflation surge with a substantial delay,” the ECB added. “But wage growth is moderating as expected, and profits are partially buffering the impact on inflation.”
ECB policymakers were likely to have breathed a sigh of relief at their meeting after U.S. President Donald Trump’s new administration did not impose blanket trade tariffs as feared, although the threats he made have cast a shadow on the outlook.
Tariffs tend to depress economic growth and if there is retaliation, raise inflation, which would put a question mark over the ECB’s easing plans.
ECB President Christine Lagarde holds her regular press conference at 1345 GMT. Investors are likely to listen for any comments on trade, high services sector inflation and volatile financial markets.
With Thursday’s decision, the ECB also lowered the rate at which banks can borrow from it for a week – to 2.90% from 3.15% – and for a day, to 3.15% from 3.40%.
(Reporting By Francesco Canepa; Editing by Catherine Evans)
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