The European Central Bank (ECB) cut interest rates yesterday for the seventh time to counter worries about economic growth fueled by US President Donald Trump’s tariff onslaught.
The bank’s move should support economic activity in the 20 countries that use the euro currency by making credit more affordable for consumers and businesses.
ECB President Christine Lagarde said at a post-decision news conference that “the major escalation in global trade tensions and the associated uncertainty will likely lower euro area growth by dampening exports.”
Photo: Ronald Wittek, EPA-EFE
“And it may drag down investment and consumption,” she said.
The bank’s rate-setting council decided at a meeting in Frankfurt to lower its benchmark rate by a quarter percentage point to 2.25 percent. The bank has been steadily cutting rates after raising them sharply to combat an outbreak of inflation from 2022 to 2023.
Now that inflation has fallen, growth worries have taken center stage. The economy in the 20 countries that use the euro grew a modest 0.2 percent in the final three months of last year. Inflation was 2.2 percent last month, close to the bank’s target of 2 percent.
The cut was widely expected by analysts given the sudden shadow cast over the eurozone’s growth outlook by Trump’s April 2 announcement of unexpectedly high tariffs on goods from other countries starting at 10 percent and ranging as high as 49 percent. The European Union faces a 20 percent tariff.
At the bank’s last meeting on March 6, Lagarde had raised the possibility of an upcoming “pause” in the bank’s series of rate cuts. But that option was practically eliminated by Trump’s announcement.
Trump has suspended the tariffs for 90 days, but the possibility of the 20 percent tariff rate he has proposed for Europe left economists and policymakers concerned that the higher costs will weigh on business activity and lead to slower growth or even a recession if he carries through.
Earlier yesterday, the Bank of Korea (BOK) held its interest rate steady at 2.75 percent, its third straight decision to keep rates unchanged after a 0.25 percentage point cut in February.
Given the “significant uncertainty” due to US tariffs and the government’s push for economic stimulus, “the board judged it appropriate to keep the base rate unchanged for now while closely assessing changes in domestic and external conditions,” the bank said.
BOK Governor Rhee Chang-yong said the decision was driven by tariff-related “uncertainty” going forward, which has grown to an “unprecedented level.”
“The intensity of US tariff policies and the swift shifts in responses from major economies are evolving so rapidly that it is currently difficult to even establish a baseline scenario for forecasts,” he said at a press conference in Seoul.
Rhee hinted that the board is considering additional cuts next month, but is “closely reviewing both domestic and external economic conditions.”
The country’s annual economic growth is expected to fall short of a recent forecast due to sweeping US tariffs and the fallout from the ex-president’s martial law declaration, he said.
“This year’s annual growth rate is now expected to fall short of the 1.5 percent forecast made in February,” Rhee said.
Additional reporting by AFP
TAKING STOCK: A Taiwanese cookware firm in Vietnam urged customers to assess inventory or place orders early so shipments can reach the US while tariffs are paused Taiwanese businesses in Vietnam are exploring alternatives after the White House imposed a 46 percent import duty on Vietnamese goods, following US President Donald Trump’s announcement of “reciprocal” tariffs on the US’ trading partners. Lo Shih-liang (羅世良), chairman of Brico Industry Co (裕茂工業), a Taiwanese company that manufactures cast iron cookware and stove components in Vietnam, said that more than 40 percent of his business was tied to the US market, describing the constant US policy shifts as an emotional roller coaster. “I work during the day and stay up all night watching the news. I’ve been following US news until 3am
UNCERTAINTY: Innolux activated a stringent supply chain management mechanism, as it did during the COVID-19 pandemic, to ensure optimal inventory levels for customers Flat-panel display makers AUO Corp (友達) and Innolux Corp (群創) yesterday said that about 12 to 20 percent of their display business is at risk of potential US tariffs and that they would relocate production or shipment destinations to mitigate the levies’ effects. US tariffs would have a direct impact of US$200 million on AUO’s revenue, company chairman Paul Peng (彭雙浪) told reporters on the sidelines of the Touch Taiwan trade show in Taipei yesterday. That would make up about 12 percent of the company’s overall revenue. To cope with the tariff uncertainty, AUO plans to allocate its production to manufacturing facilities in
COLLABORATION: Given Taiwan’s key position in global supply chains, the US firm is discussing strategies with local partners and clients to deal with global uncertainties Advanced Micro Devices Inc (AMD) yesterday said it is meeting with local ecosystem partners, including Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), to discuss strategies, including long-term manufacturing, to navigate uncertainties such as US tariffs, as Taiwan occupies an important position in global supply chains. AMD chief executive officer Lisa Su (蘇姿丰) told reporters that Taiwan is an important part of the chip designer’s ecosystem and she is discussing with partners and customers in Taiwan to forge strong collaborations on different areas during this critical period. AMD has just become the first artificial-intelligence (AI) server chip customer of TSMC to utilize its advanced
Six years ago, LVMH’s billionaire CEO Bernard Arnault and US President Donald Trump cut the blue ribbon on a factory in rural Texas that would make designer handbags for Louis Vuitton, one of the world’s best-known luxury brands. However, since the high-profile opening, the factory has faced a host of problems limiting production, 11 former Louis Vuitton employees said. The site has consistently ranked among the worst-performing for Louis Vuitton globally, “significantly” underperforming other facilities, said three former Louis Vuitton workers and a senior industry source, who cited internal rankings shared with staff. The plant’s problems — which have not
RSS