ISTANBUL

The European Central Bank (ECB) on Thursday slashed its three key interest rates by 25 basis points, meeting market forecasts.

The key deposit rate now stands at 2.25%, its lowest level since February 2023.

The interest rates on the main refinancing operations and the marginal lending facility were also cut to 2.40% and 2.65%, respectively.

This marked the seventh consecutive rate cut since the ECB initiated its easing cycle last June.

The bank stated that the disinflation process is well on track as inflation has continued to develop as it expected, with both headline and core inflation declining in March.

"Most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-term target on a sustained basis," it said.

On the other hand, the growing trade tensions have deteriorated the outlook for growth at a time when the euro area economy has been building up some resilience against global shocks, the bank noted.

"Increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions. These factors may further weigh on the economic outlook for the euro area," it added.

The rate cut came after the US imposed "reciprocal" tariffs on over 180 countries, ranging from 10% to 50% on April 2. The EU had an initial rate of 20%.

The US later postponed those tariffs for 90 days on all countries except China.

Additionally, the tariff rate on China was gradually raised from 34% to up to 245%.