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Grigory Burenkov
Grigory Burenkov, founder of Wheelerson Management Ltd and owner of Osome Group

The European Central Bank (ECB) recently announced its seventh consecutive cut of key interest rates by 25 basis points. The deposit rate, which serves as the main benchmark of monetary policy, has reached 2.25% — the lowest level in more than two years.

European financial markets, without exaggeration, had been eagerly anticipating this ECB meeting following U.S. President Donald Trump's recent announcement of new tariff measures on European goods. And now the decision has been made: the regulator continues its course toward the gradual easing of monetary conditions.

The ECB's consistency in action testifies to the regulator's strategic commitment to long-term goals of ensuring price stability and economic growth, despite external shocks.

It is impossible to disagree with experts who state that the ECB's stable policy creates predictability for investors, which is especially important under current conditions. The seventh rate cut confirms the regulator's adherence to a long-term strategy of stimulating economic growth.

This well-considered decision by the ECB's Governing Council was made based on a thorough analysis of inflationary trends and confirms confident progress in reaching the target indicators. According to the regulator's statement, the normalization of inflation is progressing in full accordance with forecasts, creating room for further economic stimulus. At the same time, ECB President Christine Lagarde noted that economic prospects require flexibility and attentiveness to data.

Adapting to new trade conditions

The ECB's decision takes into account changes in the global trade architecture, in particular recent initiatives by the U.S. administration. In early April, President Donald Trump announced the imposition of tariffs on imports from key trade partners, including the EU. Initially, a 20% rate was planned, but it was later reduced to 10% for a 90-day period to allow for constructive bilateral negotiations.

The reduction of the initial tariff rate from 20% to 10% opens a certain window of opportunity for European exporters. This 90-day period is a kind of respite that European companies can use to adapt their logistics chains and diversify sales markets.

The most important achievement is that, despite external challenges, the European economy demonstrates notable resilience. In its statement, the ECB specifically emphasized that most key core inflation indicators confirm the successful stabilization of price growth toward the medium-term target of 2%.

Two important trends are especially encouraging: the preservation of consumer purchasing power and the corporate sector's ability to adapt harmoniously to current conditions without significant increases in consumer prices.

Business activity indicators and growth prospects

The Eurozone Composite Purchasing Managers' Index (PMI), compiled by S&P Global, showed a reading of 50.1 points in April, allowing the EU economy to maintain positive momentum, albeit with some slowdown compared to the March figure of 50.9 points.

I want to emphasize that a PMI reading above the 50-point mark signals stability. Yes, the growth rate has slowed, but the main thing is that the European economy maintains a positive trajectory despite all external factors. This indicates the structural resilience of European business.

Notably, the manufacturing sector in the region's largest economies is showing unexpected resilience. In Germany, despite a drop in the overall index to 49.7 points, industrial enterprises have been increasing output for the second consecutive month.

Favorable monetary outlook

Financial analysts and investors are optimistic about the European economy's future, forecasting at least two more key rate cuts before the end of the current year. These expectations are well-founded: the strengthening of the euro against the dollar creates a natural mechanism to contain inflationary pressure, opening additional room for maneuver in monetary policy.

The strengthening of the euro plays a dual role: on the one hand, it restrains inflation; on the other, it creates certain challenges for exporters. But in the current situation, the advantages outweigh the drawbacks, as the reduction of inflationary risks gives the ECB more freedom for further monetary easing.

An important positive factor is the European Commission's balanced and pragmatic approach to international trade issues. In response to American tariff initiatives, Brussels is preparing a balanced package of measures that nevertheless leaves broad room for constructive dialogue.

Ursula von der Leyen, President of the European Commission, reaffirmed the EU's commitment to the principles of open trade, stating that the Union "is ready for negotiations to remove any remaining barriers in transatlantic trade." This approach lays the groundwork for future harmonization of trade relations.

Disagreements within the EU over specific retaliatory measures are a normal part of the consensus-building process. Each country defends its economic interests, but ultimately, as practice shows, Europeans arrive at balanced solutions. The desire to avoid trade escalation appears entirely rational, given the potential risks for key European exporters.

Prospects for the European economy: A course toward sustainable development

In a changing global economic landscape, the European Central Bank is consistently implementing a strategy aimed at ensuring sustainable growth while maintaining price stability.

I repeat, the European economy is undergoing fine-tuning. The ECB demonstrates mastery in balancing growth stimulation with inflation control. The current interest rate level creates comfortable conditions for business, especially for small and medium-sized enterprises, which form the foundation of the European economy.

A stimulative monetary policy, combined with the strengthening of the euro, creates ideal conditions for a "soft landing" scenario for the European economy. Consumers benefit from price stabilization while maintaining access to financial resources, and businesses gain the ability to plan investments and development more effectively.

Christine Lagarde's words about the need to be ready to adapt to new conditions underscore the ECB's proactive approach to managing economic processes. European regulators demonstrate an optimal combination of flexibility and consistency in achieving strategic goals.

Monetary policy is not only about interest rates, but also about shaping expectations. Again, the ECB is successfully managing market expectations, creating an atmosphere of predictability. For business, this is no less important than the rates themselves. The ability to forecast the trajectory of monetary policy allows companies to plan investments and development more confidently.

In conclusion, it can be said that the current configuration of monetary policy, focused on the gradual normalization of financial conditions while maintaining a stimulative character, opens broad prospects for the European economy for sustainable and balanced growth in the medium and long term.

(Grigory Burenkov is a Cypriot financial analyst and businessman, founder of Wheelerson Management Ltd and owner of Osome Group)