ECB to Look Past Trump Risk and Push on with Rate Cuts

The ECB is confident that inflation is heading towards its target. Kirill KUDRYAVTSEV / AFP
The ECB is confident that inflation is heading towards its target. Kirill KUDRYAVTSEV / AFP
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ECB to Look Past Trump Risk and Push on with Rate Cuts

The ECB is confident that inflation is heading towards its target. Kirill KUDRYAVTSEV / AFP
The ECB is confident that inflation is heading towards its target. Kirill KUDRYAVTSEV / AFP

Despite US President Donald Trump's saber-rattling, the European Central Bank is set to press on with interest rate cuts Thursday as officials increasingly voice confidence that the fight against inflation is on track.

The central bank hiked borrowing costs aggressively from mid-2022 to tame runaway energy and food costs, but is now bringing them back down as price rises slow and the eurozone economy looks weak.

ECB policymakers are expected to cut their benchmark deposit rate by a further quarter point to 2.75 percent on Thursday, its fifth reduction since June last year.

Recent upticks in inflation -- such as a jump to 2.4 percent in December, above the ECB's two-percent target -- have caused some jitters, AFP reported.

But ECB officials have sounded upbeat that the battle to control the pace of price rises remains on course.

"We are confident of seeing inflation at target in the course" of this year, President Christine Lagarde said in an interview with US broadcaster CNBC at the World Economic Forum in Davos.

The ECB announcement comes a day after the Federal Reserve paused its rate cuts after inflation in the United States ticked up, despite pressure from Trump to further lower borrowing costs.

Felix Schmidt from Berenberg Bank was among economists predicting a fresh rate cut by the ECB Thursday, believing that inflation will ease in 2025.

Falls "in energy prices in particular will push inflation towards two percent as the year progresses," Schmidt said.

Focus on stumbling eurozone

As high rates increasingly pressure households and businesses, the ECB's focus is now firmly on supporting growth in the eurozone, which is languishing amid a manufacturing slowdown and tepid consumer demand.

The poor performance of traditional European powerhouse Germany has weighed heavily, with the collapse of the government in Berlin and early elections adding to the uncertainty.

Political turbulence in heavyweight France, where a new government took office in December following the ouster of its predecessor, is also muddying the outlook.

But the biggest question mark for 2025 is the return to the White House of Trump, who has threatened sweeping tariffs on all imports into the United States, including from the EU.

Any new duties on EU exports to the world's biggest economy could hit the eurozone hard, while the bloc is already under pressure.

Trump "presents a risk," said Berenberg's Schmidt.

The president however appeared to be using tariff threats towards the EU "more as a prelude to negotiations, which means that they can be averted by making certain concessions", Schmidt said.

Lagarde is not expected to offer too many clues about the ECB's next moves as she stays true to the central bank's recent stance of making decisions based on the latest data.

Most analysts, however, believe the ECB will cut rates at least at its next two meetings -- on Thursday, and again in March.

But what happens beyond that is "less certain", said Stephanie Schoenwald, an economist at KfW Research, predicting the "unity" among ECB governing council members "could be over in the spring".

It was already easy to spot different views about how far to go with cuts and "what risks to European price stability emanate from US tariff policy", Schoenwald said.



China's SAIC, Huawei to Partner in Developing New Smart EVs

FILE - Chinese men hand out national flags during national day holidays near a Huawei pop up store in Beijing, Oct. 2, 2024. (AP Photo/Ng Han Guan, File)
FILE - Chinese men hand out national flags during national day holidays near a Huawei pop up store in Beijing, Oct. 2, 2024. (AP Photo/Ng Han Guan, File)
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China's SAIC, Huawei to Partner in Developing New Smart EVs

FILE - Chinese men hand out national flags during national day holidays near a Huawei pop up store in Beijing, Oct. 2, 2024. (AP Photo/Ng Han Guan, File)
FILE - Chinese men hand out national flags during national day holidays near a Huawei pop up store in Beijing, Oct. 2, 2024. (AP Photo/Ng Han Guan, File)

Chinese automaker SAIC Motor said on Friday it would partner with tech company Huawei to develop new "globally competitive" smart electric vehicles.
The tie-up sees yet another state-owned automaker betting on partnerships with Huawei, which has risen to prominence as a supplier of smart driving technologies, to boost EV sales, Reuters reported.
"The strategic cooperation between SAIC and Huawei will further leverage their respective advantages and promote China's automotive industry to a new level in the intelligent era," SAIC said in the statement.
The deal signed on Friday provides for the two companies to cooperate strategically on manufacturing, supply chain management and sales services, SAIC said in a statement, without revealing the marquee of the co-developed lineup.
The state-owned automaker reported a decline of 20% last year in overall vehicle sales, amid a brutal price war and bruising competition in the world's largest auto market.
Its venture with Volkswagen saw sales down 5.5% while SAIC-GM's sales slumped 56.5%.
SAIC, hit with the EU's steepest extra tariffs of 35.3%, also suffered a slide of 14% in overseas shipments in 2024.
The deal adds to Huawei's expanding partnerships with state-owned automakers such as Changan, Dongfeng and BAIC Motor.
Changan set up a joint venture with Huawei and battery maker CATL in 2022 to make Avatr EVs, the sales of which more than doubled in 2024 on the year.
Dongfeng-backed Seres more than tripled its annual sales of Aito-branded cars in 2024, with the best-selling models equipped with Huawei's advanced driver assistance systems and sold in the tech firm's showrooms nationwide.
Huawei and BAIC launched their first EV under the joint brand Stelato in August.