European Central Bank cuts benchmark interest rate as inflation slows

The European Central Bank cut its benchmark interest rate by a quarter point to 2.5%, as inflation continues to near its 2% target and Eurozone growth remains weak.

Analysts worry that inflation could rise again, however, as US tariffs come into force. A hefty government spending boost by typically fiscally conservative Germany also triggered a sell-off in global bonds, complicating the ECB’s longer-term decisions.

Goldman Sachs yesterday raised its forecast for the “terminal rate,” the point at which interest rates balance growth and inflation, while a senior economist at Dutch lender ABN Amro told Bloomberg: “The outlook could change significantly in the coming months.”