The European Central Bank on Thursday announced a 25-base-point interest rate trim, which took the deposit rate to 2%, which was below between mid-2012 to 4%.

Prior to the announcement, traders were priced at about 99% of the possibility of the quarter-point cut according to LSEG data.

The ECB said in its statement, “Especially, the decision to reduce the deposit rate – the rate through which the governing council forwards the monetary policy stance – is based on its updated assessment of inflation approaches, the dynamics of the underlying inflation and the strength of monetary policy transmission.”

Euro zone inflation fell below the 2% ECB target rate in May, according to a cooler-to 1.9% Initial Data published earlier this week.

However, there has been a decrease in economic development as interest rates have decreased. The latest estimates show that in the first quarter of 2025, the euro zone expanded 0.3%.

The central bank’s decision comes at an important time for the Euro sector economy as businesses and policy makers face uncertainty in view of growing geopolitical stresses.

US President Donald Trump’s tariff policy is a major concern, expected to have heavy weight on economic development with duties. Some of the sector-specific tariffs, especially, can work hard in Europe as major industries such as steel and auto are affected.

The effect of tariff on inflation is less pronounced and can depend on what, and how, the European Union attacks back, policy makers have said. Retanic measures from the European Union are currently on breaks, but the leaders of the block have said that they are ready to implement them when needed. Questions mark also remains that the plan to increase defense spending throughout Europe can affect the economy.

This is a braking news story, please see back to update.