European Central Bank cuts interest rates again

The European Central Bank (ECB) has cut interest rates for the sixth time in nine months, lowering its main rate to 2.5% from 2.75% to support eurozone economic growth. The move comes amid economic uncertainties, including potential US tariffs and increased European military spending.

The rate cut coincided with a sharp sell-off in German government bonds, which spread to other markets like the UK. Germany’s plans to boost military and infrastructure spending by loosening fiscal rules have raised concerns about rising debt, leading to a surge in German bond yields their biggest jump since 1997.

Despite the ECB’s efforts, eurozone growth remains sluggish, with projections for 2025 at just 0.9%. The bank remains focused on bringing inflation down to its 2% target while navigating external risks, including the potential impact of US trade policies under a Trump administration.