ECB Cuts Interest Rates amid Trade Concerns

FRANKFURT (Reuters) – A handful of European Central Bank policymakers initially wanted a larger interest-rate cut on Thursday, worried among other things that new U.S. tariffs would hamper economic growth, three sources told Reuters.

The ECB cut interest rates by a quarter of a percentage point and kept the door open to more easing as the euro area economy is dragged down by political instability at home and the threat of a fresh U.S. trade war.

However, around five of the 26 members of the Governing Council initially pushed for a 50-basis-point cut in light of lower inflation and growth forecasts. They argued, in particular, that economic output could grow by less than the ECB's already downgraded 1.1% projection next year if Donald Trump's incoming U.S. administration imposed new tariffs on the European Union.

The small minority of policymakers clamoring for the bigger cut soon yielded, according to sources, adding there was little appetite for rushing decisions given the prevailing uncertainty.

An ECB spokesman declined to comment.

ECB President Christine Lagarde stated that Thursday's cut was backed by all policymakers and that the staff's new economic projections do not reflect any U.S. tariff that has not already been introduced.