FRANKFURT, Germany (AP) — The European Central Bank cut interest rates Thursday for the seventh time to counter worries about economic growth fueled by President Donald Trump’s tariff onslaught.
The bank’s move should support economic activity in the 20 countries that use the euro currency by making credit more affordable for consumers and businesses.
ECB President Christine Lagarde said at a post-decision news conference that “the major escalation in global trade tensions and the associated uncertainty will likely lower euro area growth by dampening exports."
"And it may drag down investment and consumption," she said.
The bank’s rate-setting council decided at a meeting in Frankfurt to lower its benchmark rate by a quarter percentage point to 2.25%. The bank has been steadily cutting rates after raising them sharply to combat an outbreak of inflation from 2022 to 2023.
Now that inflation has fallen, growth worries have taken center stage. The economy in the 20 countries that use the euro grew a modest 0.2% in the last three months of 2024. Inflation was 2.2% in March, close to the bank’s target of 2%.
The cut was widely expected by analysts given the sudden shadow cast over the eurozone’s growth outlook by Trump’s April 2 announcement of unexpectedly high tariffs, or import tax, on goods from other countries starting at 10% and ranging as high as 49%. The European Union faces a 20% tariff.
At the bank’s last meeting on March 6, Lagarde had raised the possibility of an upcoming “pause” in the bank’s series of rate cuts. But that option was practically eliminated by Trump’s announcement.
The bank’s benchmark steers rates throughout the economy. Lower interest rates make it less expensive to borrow money and buy goods ranging from homes to new factory equipment. That supports spending, business investment and hiring.
Trump has suspended the tariffs for 90 days, but the possibility of the 20% tariff rate he has proposed for Europe left economists and policymakers concerned that the higher costs will weigh on business activity — and lead to slower growth or even a recession if he carries through. The U.S. is Europe’s largest trade partner with some 4.4 billion euros ($5 billion) in goods and services crossing the Atlantic every day in both directions.
Uncertainty is another factor that could slow the economy since Trump’s pause for negotiations leaves it unclear where the tariff rate will actually settle. Businesses may hold off on making decisions if they don’t know what their costs will be.
European Union officials have offered Trump a “zero for zero” option that would see both sides dropping tariffs on industrial goods including cars. But Trump has said that won't be enough, and raised the possibility of Europe importing large additional quantities of US liquefied natural gas.
Economists at Berenberg bank think that by midyear some of the tariffs will be negotiated away, ending at around 12%. However that is still around 10 percentage points higher than average tariffs before Trump. in addition to that comes a separate 25% tariff on autos, aluminum and steel from all countries. The auto tariff will hit Europe’s prominent auto industry hard - and Trump has indicated it is is not up for negotiation.
Lagarde said the “cloud of uncertainty” over tariffs meant that rate decisions going forward would have to be taken on a meeting by meeting basis depending on what happens during the 90-day tariff truce.
“There is a negotiation which is ongoing, players around the tables have stated their position, proposals have been made, at least on one side, but all of that could change," she said.
"There’s a degree of unpredictability which adds to the uncertainty.”
President of European Central Bank, Christine Lagarde, arrives for a press conference after an ECB's governing council meeting in Frankfurt, Germany, Thursday, April 17, 2025. (AP Photo/Matthias Schrader)
FILE - The European Central Bank rises silhouetted against the blue sky, in Frankfurt, Germany, Thursday, March 6, 2025. (Boris Roessler/dpa via AP, File)
Israel attacked Iran’s capital early Friday, with explosions booming across Tehran.
An Israeli military official said that the Israeli Air Force targeted Iranian nuclea r and military sites, without identifying them. The official spoke to journalists on condition of anonymity to discuss the ongoing operation.
Air-raid sirens preventatively rang out in Israel.
The attack comes as tensions have reached new heights over Tehran’s rapidly advancing nuclear program. The Board of Governors at the International Atomic Energy Agency for the first time in 20 years on Thursday censured Iran over it not working with its inspectors. Iran immediately announced it would establish a third enrichment site in the country and swap out some centrifuges for more advanced ones.
Israel for years has warned it will not allow Iran to build a nuclear weapon, something Tehran insists it doesn’t want — though officials there have repeatedly warned it could.
Here's the latest:
Iranian state television says the head of Iran’s paramilitary Revolutionary Guard, Gen. Hossein Salami, is feared dead after an Israeli attack.
It added that one other top Guard official, as well as two nuclear scientists, were also feared dead. The report offered few other details.
Iran’s Revolutionary Guard, created after its 1979 Islamic Revolution, is one of the main power centers within the country’s theocracy. It also controls Iran’s arsenal of ballistic missiles, which it has used to attack Israel twice during the ongoing Israel-Hamas war in the Gaza Strip.
An Israeli attack on Iran has set the headquarters of Iran’s paramilitary Revolutionary Guard ablaze, state television reported Friday.
A reporter on air said he was unable to get closer due to the intensity of the fire in Iran’s capital, Tehran.
Multiple sites in the capital had been hit in the attack, which Israeli Prime Minister Benjamin Netanyahu said targeted both sites of and officials leading Iran’s nuclear program and its ballistic missile arsenal.
Israeli Prime Minister Benjamin Netanyahu said that Israel targeted Iran’s main enrichment facility in Natanz and the country’s ballistic missile program, as well as top nuclear scientists and officials.
He said Iran was working on a new plan to destroy Israel after its old plan, its circle of proxies, failed. He called it an intolerable threat that must be stopped.
U.S. Sen. Jack Reed, the top Democrat on the Senate Armed Services Committee, called the Israeli strike “a reckless escalation that risks igniting regional violence.”
“These strikes threaten not only the lives of innocent civilians but the stability of the entire Middle East and the safety of American citizens and forces,” he said. Reed added: “I urge both nations to show immediate restraint, and I call on President Trump and our international partners to press for diplomatic de-escalation before this crisis spirals further out of control.”
Dozens of commercial airliners were in Iranian airspace as the strikes took place, according to flight tracking websites.
More than an hour after the Israeli attack, some were still making their way out of Iranian airspace, but some abruptly altered course to more quickly exit the area.
Many nations' jets already did not overfly Iran because of regional tensions.
The extent of Israel's strikes remained unclear early Friday.
Explosions could be heard across Tehran, Iran’s capital city. There were some images circulating of damaged residential buildings.
Iranian state television also was being careful in how they described the assault, suggesting that some areas outside of Tehran that had also been hit.
Israel’s Prime Minister Benjamin Netanyahu said in an address on YouTube that the country launched “a targeted military operation roll back the Iranian threat to Israel’s very survival.”
He added that the attacks will continue “for as many days at it takes to remove this threat.”
Israel closed its airspace in anticipation of Iranian retaliation.
Israel’s Defense Minister Israel Katz warned that attacks were expected.
“In the wake of the state of Israel’s preventive attack against Iran, missile and drone attacks against Israel and its civilian population are expected immediately,” he said in a statement.
The statement added that Katz “signed a special order declaring an emergency situation in the home front.”
“It is essential to listen to instructions from the home front command and authorities to stay in protected areas,” it said
U.S. Secretary of State Marco Rubio said Israel took “unilateral action against Iran” and that Israel advised the U.S. that it believed the strikes were necessary for its self-defense, while warning Iran not to target U.S. forces in retaliation.
In a statement, he said: “Tonight, Israel took unilateral action against Iran. We are not involved in strikes against Iran and our top priority is protecting American forces in the region. Israel advised us that they believe this action was necessary for its self-defense. President Trump and the Administration have taken all necessary steps to protect our forces and remain in close contact with our regional partners. Let me be clear: Iran should not target U.S. interests or personnel.”
An Israeli military official says that his country targeted Iranian nuclear and military sites, without identifying them.
The official spoke to journalists on condition of anonymity to discuss the ongoing operation.
The Israeli official said Iran poses three threats to state of Israel: First, he alleged that the Iranian government is advancing a “secret program” to develop nuclear weapons. The U.S. intelligence community assesses that Iran is not actively pursuing a nuclear weapon.
Second, the Israeli official said, Iran has thousands of ballistic missiles. Finally, he said Iran has been distributing weapons and arms to proxy groups across the region like Hezbollah and Hamas.
— Josef Federman
As the explosions in Tehran started, President Donald Trump was on the lawn of the White House mingling with members of Congress. It was unclear if he had been informed but the president continued shaking hands and posing for pictures for several minutes.
Earlier in the day, Trump said an Israeli attack over Iran’s nuclear program was not imminent “but it looks like it’s something that could very well happen.”
The U.S. has been preparing for something to happen, pulling some diplomats from Iraq’s capital and offering voluntary evacuations for the families of U.S. troops in the wider Middle East.
The White House did not have an immediate comment Thursday night.
Smoke rises up to the sky, in Tehran, Iran, Friday, June 13, 2025. (AP Photo/Vahid Salemi)
