ECB's Balancing Act: Navigating Interest Rates Amid Global Trade Tensions

Piero Cipollone of the European Central Bank emphasized potential further rate cuts despite global trade tensions, notably the US-China trade war. With inflation moderating, economic indicators are stabilizing, though uncertainties remain. The ECB aims to maintain economic stability amidst rising energy costs and geopolitical risks.

The European Central Bank (ECB) might further reduce interest rates as inflation pressures ease, according to a statement by board member Piero Cipollone. The US-China trade war poses a significant risk, potentially impacting the euro zone's economic stability, Cipollone told Reuters.

The ECB has already slashed borrowing costs five times since June as economic growth concerns overshadow inflation fears. Investors expect up to three additional rate cuts within the year to revitalize an economy recovering from prolonged stagnation. Despite external pressures, Cipollone remains confident about ECB's strategic direction.

Highlighting the influence of global trade dynamics, Cipollone warned of potential challenges arising from the US's aggressive trade policies. Yet, he downplayed tariffs' direct impact on Europe, stating that firms can mitigate costs, and the euro's depreciation will provide a buffer against economic shocks.

(With inputs from agencies.)