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Inflation slides to 1.9% in Europe, as
worries shift from prices to Trump and tariffs
[June 04, 2025]
FRANKFURT, Germany (AP) — Inflation in the 20 countries that use
the euro fell to 1.9% in May from 2.2% in April, clearing the way for
more rate cuts from the European Central Bank to support growth in the
face of U.S. President Donald Trump's tariff offensive.
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A view of the European currency Euro sculpture, at Germany's main
financial district in Frankfurt, Germany, Wednesday, April 9, 2025. (AP
Photo/Martin Meissner, File) |
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Lower energy prices helped bring consumer prices in May to below
the ECB's 2% target for the first time since September.
Increasing signs that inflation is back under control after a
painful outbreak in 2021-23 leaves room for the ECB to turn its
attention to worries about the impact of a slew of new import
taxes on EU goods in the US that threaten to slow Europe's
export-oriented economy.
Reductions in the ECB's benchmark rate, currently at 2.25%,
lower borrowing costs throughout the economy, making it easier
to buy things on credit and stimulating economic activity and
investment. Higher rates combat inflation, but for the moment
that battle appears to have been won.
The ECB's rate-setting council meets on Thursday under bank
President Christine Lagarde to determine the next step on rates.
Analysts expect a cut of a quarter percentage point and for
Lagarde to indicate that at least one more cut is possible at
future meetings.
Trump has raised tariffs on steel, aluminum and autos from
almost all trading partners to 25%, and has now said he will
raise the rate to 50% on steel, as well as proposing a 20%
tariff on all European Union goods. That last tariff has been
paused ahead of a July 14 deadline pending negotiations with EU
officials. Worries about the impact of tariffs on growth led the
European Union's executive commission to cut its growth forecast
for the 20 euro member countries this year to 0.9% from 1.3% in
its fall 2024 forecast.
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