The European Central Bank has pushed interest rates to a new low of 2% in an aggressive bid to stimulate the eurozone’s stagnant economy. This is the eighth quarter-point cut in the past year, reflecting the depth of the challenges faced by the 20-member currency bloc, which is reeling from the effects of international trade conflicts.
Economic growth has significantly decelerated across the eurozone, with France, Germany, and Italy experiencing particularly sluggish performance. The bleak outlook for the next year has prompted the central bank to take decisive action to reduce borrowing costs and encourage economic activity.
The ECB’s decision was also influenced by a recent dip in eurozone inflation below its target. While trade uncertainties are a major concern, the central bank expects increased government investment in defense and infrastructure to provide some counterbalance. ECB President Christine Lagarde, while acknowledging the “far-fetched” idea of complete confidence, maintained that the eurozone is “well-positioned” to navigate the current environment.
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