European Central Bank to cut rates again with Trump threat and U.S. divergence in focus

The European Central Bank is expected to start its 2025 meetings with an interest rate cut, with markets pricing in at least a quarter-percentage point reduction. This would mark the fifth trim since June 2024, with further cuts expected in March and June meetings. Despite a slight increase in euro area inflation, weak business activity and tepid consumer confidence are prompting economists to forecast minimal GDP growth in the fourth quarter. ECB President Christine Lagarde may face questions regarding the bank’s divergence from the Federal Reserve’s monetary policy, as the Fed is expected to hold rates steady while the ECB continues its easing measures.

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