FRANKFURT, Germany, Jan 30, 2025 (BSS/AFP) - Despite US President Donald
Trump's sabre-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.

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.