The European Central Bank reduces interest rates as economic growth stagnates

The European Central Bank reduced interest rates on Thursday for the fifth consecutive time in the midst of slow growth in the region’s economy.

Politicians lowered the bank’s key rate one quarter to 2.75 percent as inflation remained relatively close to their 2 percent target. The movements come a day after the American Federal Reserve Keeping stable as the economic views of the United States and Europe diverges.

“The disinflation process is good on the field,” said Christine Lagarde, the president of the European Central Bank, on Thursday, adding that she expected inflation to return to the target this year.

The annual inflation in the euro area was 2.4 percent in December, slightly higher than the previous month as energy prices rose.

The central bank’s decision makers have different perspectives on the prospects of inflation. Some emphasize signs of persistent inflation pressure, such as price growth in the service sector, which has kept about 4 percent. Others, including the bank’s main economist, Philip R. Lane, has said that if borrowing costs remain too high too long Then inflation could fall too low. But the decision on Thursday to reduce the rates was unanimous, said Mrs. Lagarde.

She added that the euro zone economy was expected to remain weak in the short term. Earlier in the day, data showed that the economy stagnated in the fourth quarter last year and wandering after they expanded 0.4 percent in the previous quarter.

The unexpected decline increases the pressure on the central bank’s officials to reduce interest rates to help generate economic growth in a region troubled by its diminishing competitiveness with the United States and China and is extremely vulnerable to trade disorders. The German economy, the block’s largest, has been in the last two years, as high energy costs and interest rates weigh for businesses and consumers, and political uncertainty prior to the election next month has worsened the question.

But the central bank officials have said that governments have to make cross -border business and investment easier and not rely on monetary policy to stimulate economic growth.

Although central bankers have had the worst of the recent inflation crisis behind them, they face new financial risks, especially the threat of customs duty from Mr. Trump. If the customs are charged and the countries are reciprocated, a trade war can send unrest through the global economy and shake prices.

Last year, both the US Federal Reserve and the European Central Bank reduced rates by a full percentage point. Now their paths diverging.

Dealers expect the euro zone central bank to reduce the rates of most of its meetings in the first half of this year.

But the US central bank is not expected to deliver many more rates this year despite the calls of President Trump to lower the rates because the economy is still resistant and the labor market is strong. Mr. Trump’s policy, such as cutting down on immigration and increasing import tariffs, could aggravate inflation pressure at home.

The uncertainty of these policies and their potential effects on inflation abroad makes it more difficult for central bankers to signal what might come next.

So far, Europe has not been the central focus of Trump’s plans to increase customs. But a sense of how disturbing such an event would come on Wednesday from Canada, which is facing the threat of 25 percent customs duties. Canada’s central bank Cut interest rates and decisively dropped that guidance when it waited to see if Mr. Trump would move on with his proposed tariffs, which are expected to take effect Saturday.

Mrs. Lagarde reiterated that the European Central Bank would continue to make decisions at each meeting and do not commit to any path on interest.

“For those who would like this solid forward guidance, it would be completely unrealistic to do some of that kind,” she said. “Simply because we are facing significant and probably increasing uncertainty at the moment.”