The ECB is expected to announce a 25 basis point rate cut in its interest rate decision on Thursday (April 17) at 20:15 Beijing time, which will be the seventh rate cut in the past year. Against the backdrop of global trade turbulence and slowing economic growth, the European Central Bank hopes to boost the economy by further relaxing monetary policy. Although US President Trump has suspended some tariffs on Europe, the remaining tariffs and financial market volatility still pose a serious threat to the eurozone economy. The market generally expects that this interest rate cut is a foregone conclusion, and the focus will shift to President Lagarde's statement at the press conference.

The trade war is shrouded in clouds, and the prospects for economic growth are bleak

The European Central Bank previously estimated that if the United States fully implements tariff measures, the economic growth rate of the eurozone may decrease by 0.5 percentage points, equivalent to wiping out nearly half of the expected growth rate. Deutsche Bank analysis points out that even if some tariffs are suspended, trade uncertainty will continue to drag down investment and consumer confidence. What is even more worrying is that the severe fluctuations in the financial market may further tighten the financing environment, leading to an economic slowdown that exceeds expectations.

Inflation remains sluggish, interest rate cuts are imperative

The current inflation level in the eurozone is far below the European Central Bank's 2% target and faces multiple downward pressures. The strengthening of the euro exchange rate, the decline in energy prices, and the possibility of Asian powers dumping goods into the European market may all lead to a further decline in inflation rates. Morgan Stanley predicts that based on current market trends, the inflation rate may even soon fall below the target level. In this situation, the European Central Bank's decision to cut interest rates is both to stimulate the economy and to prevent inflation expectations from continuing to decline.

The market is closely monitoring Lagarde's statement, and there are still uncertainties about the policy direction

Although the decision to cut interest rates is almost certain, investors are more concerned about Lagarde's wording at the press conference. The market hopes to find three key clues from her speech: first, whether the European Central Bank still considers interest rates to be "restrictive", which will imply whether there is still room for interest rate cuts in the future; Secondly, is the central bank's assessment of the impact of the trade war more pessimistic; The third question is whether clearer policy guidelines will be released in addition to emphasizing "data dependence".

Summary: The loose cycle may be extended, and economic risks cannot be ignored

This interest rate cut is another attempt by the European Central Bank to address the economic slowdown, but there is still uncertainty about its effectiveness. If trade tensions escalate again or the global economy further deteriorates, the European Central Bank may be forced to take more stimulus measures or even restart quantitative easing policies. For investors, tonight they should not only focus on the decision to cut interest rates itself, but also carefully interpret every sentence of Lagarde to judge the future policy direction. In the context of the volatile global economy, every action taken by the European Central Bank may have a profound impact on the market.