Take Two: ECB cuts rates; global trade volumes expected to fall due to tariffs
- 22 April 2025 (3 min read)
What do you need to know?
The European Central Bank cut its key deposit rate by 25 basis points, bringing borrowing costs down to 2.25%, as inflation eased further across the bloc. It said the outlook for growth “has deteriorated owing to rising trade tensions” and that it was determined to ensure inflation stabilises at its 2% target. Eurozone annual inflation slowed to 2.2% in March, from 2.3% in February, the official final estimate confirmed. Core inflation, which excludes more volatile energy, food, alcohol and tobacco prices, eased from 2.6% to 2.4%, the lowest rate since October 2021.
Around the world
Global trade is expected to fall 0.2% this year as a result of US President Donald Trump’s tariffs, the World Trade Organization said – a sharp reversal from the 2.7% growth it had earlier predicted. It forecast a 12.6% drop in North America exports, and said the application of reciprocal tariffs and broader policy uncertainty could lead to an even sharper decline of 1.5% in global goods trade in 2025. Notably, recent market volatility, on the back of ongoing trade tensions and fears of recessions, helped push the gold price to a record high last week.
Figure in focus: 5.4%
China’s economy grew by 5.4% on an annual basis in the first quarter (Q1), the same rate as in Q4 and in line with its official target of “around 5%”. The pace of growth, which exceeded market forecasts, was driven by robust consumer spending and strong industrial output. However, escalating trade tensions are expected to present further challenges for China’s growth outlook. Additional stimulus measures from Beijing are expected to help mitigate the effects though AXA IM has revised its GDP growth forecast for China to 4.3% for 2025 and 4.0% for 2026, from 4.5% and 4.1% respectively.
Words of wisdom: AI Continent Action Plan
A European Commission initiative which aims to position the European Union (EU) as a global leader in artificial intelligence (AI). The plan aims to boost Europe’s AI industry helping to improve its competitiveness with the US and China, while transforming traditional industries and Europe’s talent pool into “powerful engines of AI innovation and acceleration”. It will include a network of AI factories to support startups and research activities to foster innovation and aims to triple the EU’s data centre capacity in the next five to seven years.
What’s coming up
The World Bank and International Monetary Fund Spring Meetings start on Monday and will run throughout the week, discussing key international issues, including the global economy and growth outlook, financial stability, and poverty reduction. On Wednesday a spate of flash composite Purchasing Managers’ Indices are issued, covering the US, Eurozone, UK and Japan. Germany's closely watched Ifo Business Climate index is published on Thursday.
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