U.S. President Donald Trump is getting his wish that interest rates drop across the world, just not at home where a strong economy and uncertainty over his own policies have set the stage for the Federal Reserve to diverge from its central bank peers.

Against this backdrop, the ECB’s communication in the policy statement and President Lagarde’s comments will hold the key to determining the scope and timing of the next rate cuts as the Bank battles concerns over economic growth and potential tariffs by United States (US) President Donald Trump’s administration.

On Thursday, the European Central Bank decided to lower interest rates by 0.25 percentage points. This action is justified by the expected achievement of the inflation target at 2 percent. After the announcement,

The ECB is expected to drop its main lending rate from 3 per cent to 2.75 per cent, its fifth cut since last July.

Officials reduced the deposit rate by a quarter-point to 2.75% — as predicted by all analysts in a Bloomberg poll.

The European Central Bank meets on Thursday for the first time since Donald Trump returned to office, leaving U.S. tariff threats looming over the euro zone's sluggish economy and potentially complicating the economic outlook.

European Central Bank Governing Council member Klaas Knot said investor bets for interest-rate cuts in January and March are reasonable, while any commitment beyond is difficult due to heightened global uncertainty.

Speaking to leaders at the World Economic Forum in Davos, Lagarde had to go onto the defensive in the face of criticism from a leading US financier.

Chief Adviser Professor Muhammad Yunus has sought the assistance of the European Central Bank president Christine Lagarde to recover

US President Donald Trump is getting his wish that interest rates drop across the world, just not at home, where a strong economy and uncertainty over his own policies have set the stage for the Federal Reserve to diverge from its central bank peers.

Euro zone inflation will be back at the European Central Bank's 2% target by the summer and interest rates could keep on falling to support the economy, French central bank chief Francois Villeroy de Galhau said just a day after the ECB's fourth straight rate cut.