European Central Bank slashes interest rates as Trump trade pain hits

• The tariffs and policy-related uncertainty have weighed on Europe's already sluggish economy.

What they're saying: "The euro area economy has been building up some resilience against global shocks, but the outlook for growth has deteriorated owing to rising trade tensions," the European Central Bank said in its policy statement.

• "Increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions."

The intrigue: It is the latest central bank to lower borrowing costs as the Fed stands pat, waiting for more policy clarity before it decides whether to follow its global peers.

• Trump has lambasted the Fed for its "wait-and-see" approach, notably calling on the U.S. central bank to follow the European Central Bank's lead.

Yes, but: Europe's post-pandemic recovery has been sluggish, unlike the U.S. economic resiliency. That strength has made inflation harder to beat, a bigger challenge now that tariffs threaten to hike prices.

• Euro area inflation rose 1.9% in the year ending in May — slightly below the 2% inflation rate the central bank targets.

The bottom line: Economists anticipate the ECB won't cut rates further until trade policy uncertainty recedes.

Editor's note: This story has been updated with additional background.