ECB cuts rate, inflation data blunder, car sales rise – Daily Business

The European Central Bank has cut its main interest rate to a three-and-a-half year low of 2% in order to tackle slowing economic growth and the impact of US tariff policy.

A 0.25 percentage point cut in the main deposit is the eighth rate cut since June 2024, the most aggressive cutting of any major central bank, and takes rates to their lowest since December 2021.

On Wednesday, Mr Trump doubled tariffs on EU steel and aluminium imported to the US from 25% to 50%.

He has paused the taxes on other European goods sold to the US until 9 July as talks to reach a deal continue but a 10% tariff remains in place until then.

Meanwhile, the EU has drawn up its own list of tariffs on €21bn-worth of US goods. However, the ECB expects the economy will gather pace in the medium-term, boosted by European spending on defence and infrastructure.

Mr Trump is also engaged in a stand-off with US Federal Reserve chair Jerome Powell who is under pressure from the president to cut the cost of borrowing. Analysts still expect one more Interest rate cut by the Bank of England this year.

Both London and Washington continue to have concerns about stubborn inflation.

Christine Lagarde, president of the European Central Bank, has said she will finish her term after speculation she will join the World Economic Forum.

Inflation data blunder

The UK’s statistics agency has discovered it had been given incorrect road tax data by the Department for Transport, meaning the inflation rate for April was incorrect.

The Office for National Statistics (ONS) said the it should have been 3.4%, instead of the 3.5% official figure.

It comes amid continuing criticism of the ONS over the quality of its data, not least from the Bank of England governor Andrew Bailey which affects its own decision making.

The ONS said it had spotted an error in Vehicle Excise Duty data. It found that the number of vehicles people were paying road tax on in the first year of registration was too high in the data that was given.

The statistics agency said it would not be amending April’s inflation figure, but it would be reviewing how it checks the quality of data from outside the agency “in light of this issue”.

New car sales rise

The UK’s new car market showed signs of tentative recovery in May, with registrations rising 1.6% year-on-year, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT).

James Hosking, managing director of AA Cars, comments: “The UK’s new car market delivered a solid performance in May, with registrations climbing as the industry begins to find its feet following a challenging start to the year.

“This growth suggests that buyers are slowly regaining confidence, aided by lower interest rates and attractive new car offers.

“The May uplift likely reflects a combination of pent-up demand from earlier in the year, strong fleet appetite, and the pull of the new 25-plate registration.

“These factors often combine to lift sales around this time of year, particularly for company cars and business fleets looking to take advantage of tax efficiencies.”

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