FRANKFURT, Jan 30, (V7N) – The European Central Bank (ECB) is expected to proceed with another interest rate cut on Thursday, despite concerns over inflation upticks and warnings from U.S. President Donald Trump.

With inflation gradually easing and the eurozone economy showing signs of weakness, the ECB is set to lower its benchmark deposit rate by 25 basis points to 2.75%, marking its fifth consecutive reduction since June 2024.

Despite a December inflation rise to 2.4%, above the ECB’s 2% target, policymakers remain optimistic. ECB President Christine Lagarde recently stated in Davos, "We are confident of seeing inflation at target in the course of this year."

Economists, including Felix Schmidt of Berenberg Bank, expect inflation to ease further in 2025, citing falling energy prices.

The ECB's shift toward easing monetary policy comes as the eurozone economy struggles, weighed down by:

A manufacturing slump

Weak consumer demand

Germany’s political uncertainty following government collapse

France’s new administration after its previous government was ousted

The return of Trump to the White House adds further uncertainty. He has threatened sweeping tariffs on all U.S. imports, including from the EU—potentially harming eurozone exports.

Trump’s tariff rhetoric could be "a prelude to negotiations," Schmidt noted, suggesting they might be avoided through diplomatic concessions.

While Lagarde is expected to remain cautious in signaling future moves, analysts foresee at least two more rate cuts, in January and March.

However, unity among ECB policymakers could fracture by spring, warned Stephanie Schoenwald of KfW Research, as debates grow over the pace of cuts and U.S. trade risks.

With Trump’s trade policies looming and eurozone growth uncertain, the ECB faces tough decisions in the months ahead.