(Sharecast News) - The European Central Bank went ahead and cut interest rates for an eighth consecutive time, lowering its deposit rate by 25 basis points to 2.0%, and cut its short and medium-term inflation forecasts.
However, rate-setters in Frankfurt described the current level of uncertainty as "significant" and said that decisions going forward would be taken on a meeting by meeting basis.

Lagarde also shot down talk that she might leave for another post before the end of her mandate.

Worth noting, during her post meeting press conference, ECB boss Christine Lagarde explained that its base scenario did not include what the level of any retaliation to US trade tariffs might be, nor the degree of potential disruptions to supply chains.

Indeed, the outcome of the trade negotiations remained to be seen.

Nevertheless, ECB staff lowered their forecasts for consumer price gains in 2025 and 2026 by three tenths of a percentage point to 2.0% and 1.6%, respectively.

Headline CPI was seen at 2.0% in 2027, right in line with the central bank's target.

The downward revisions were the result of lower forecasts for energy prices and a stronger currency.

GDP growth in the euro area meanwhile was still seen reaching 0.9% in 2025 and accelerating to 1.1% during the following year and 1.3% in 2027.

The drag from trade uncertainty was expected to be offset by government investment and exports.

Should trade tensions escalate further, then growth and inflation might fall below the ECB's baseline projections.

The opposite was also true.

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