European Central Bank joins Federal Reserve in paving way for stimulus

FRANKFURT, Germany — The European Central Bank joined the U.S Federal Reserve in making clear that more stimulus could be coming soon to support an economy weakening in the face of global trade tensions.

The ECB’s rate-setting board left its key interest benchmarks unchanged at a policy meeting Thursday but said it could cut them as its next move. It also said it was telling staff to study ways to restart its bondbuying stimulus program in coming weeks.

Several analysts said the statements meant the ECB, which sets interest rate benchmarks for the 19 countries that use the euro, could deliver a stimulus package at its next meeting Sept. 12.

President Mario Draghi stressed repeatedly at his news conference that the bank was “determined to act.”

“We say, we don’t like the current inflation,” he said. “No question of accepting the inflation we are seeing today.”

Inflation in the eurozone is at an annual 1.3%, short of the ECB’s goal of just under 2% that is considered healthiest for the economy, even after years of low interest rates and massive amounts of monetary stimulus.

And global economic growth is being dragged down by events like the U.S.-China trade war that have spurred other central banks, including the Fed, to also move toward providing more stimulus.

Officials at the Fed have signaled that they could cut their interest rate benchmark from a range of 2.252.5% at their July 30-31 meeting. Central banks in South Korea, Indonesia and South Africa have already cut rates in recent days.

The U.S. and China have imposed import taxes on hundreds of billions of dollars-worth of traded goods. U.S. President Donald Trump has warned that more tariffs could be coming if he cannot reach a trade deal with China to reduce the U.S. trade deficit. Trump has also threatened to put tariffs on Europe’s big automotive industry.

Meanwhile, Britain’s exit from the European Union on Oct. 31 could result in tariffs on trade if the country does not reach a withdrawal deal with the rest of the bloc.

These combined uncertainties have mainly hurt the manufacturing sector in Europe, particularly in export-focused countries like Germany, where the labor market is otherwise strong.

The European Central Bank’s key move on Thursday was to change the wording of its policy statement by saying that rates will remain at current record lows “or lower” through the middle of 2020. Adding “or lower” emphasized that the next move could be down.

The monetary authority for the 19 countries that use the euro meanwhile began looking into a possible new round of bond purchases, which inject newly created money into the economy in the hope of stimulating economic activity and raising inflation.