The European Central Bank cut interest rates once more on Thursday, marking its sixth reduction since June, but cautioned about "phenomenal uncertainty" ahead. Risks such as escalating trade tensions and increased defence spending could stoke inflation, potentially prompting a pause in its policy easing next month. The ECB lowered the deposit rate to 2.5%, acknowledging slowing inflation and weaker economic activity, while signalling that monetary policy is becoming less restrictive as inflation edges closer to its 2% target.ECB President Christine Lagarde refrained from reiterating her previous stance that further rate cuts were certain, instead highlighting that both a cut and a pause remain possible. "Monetary policy is becoming meaningfully less restrictive," she stated, emphasising the significance of this shift. With inflation at 2.4% last month, the ECB has maintained that restrictive measures will no longer be needed once inflation is firmly on track to meet its target this year.
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