Zero Interest Rates Are Back in Europe

Officials in America are grappling with the risk that inflation could stay uncomfortably high, in part because of President Trump’s tariffs. But in Europe, they worry that inflation could be too low.

On Thursday, Switzerland’s central bank lowered interest rates to zero, its sixth consecutive cut, after consumer prices fell 0.1 percent in May from a year earlier. Policymakers said the step was necessary to counter weak inflationary pressures, which can put a damper on economic growth.

The rate cut returns the region to the precipice of the unusual situation it was in for many years before the pandemic, when many central banks set rates at or below zero. The region was struggling with low inflation and sluggish growth stemming from a debt crisis, and rates were eventually raised significantly above zero to counter the post-pandemic surge in inflation.

Price growth has cooled considerably in recent months, as the economic outlook has deteriorated in the face of Mr. Trump’s trade war.

Since April, when Mr. Trump raised tariffs on America’s biggest trading partners, the U.S. Federal Reserve has taken a cautious approach to interest rates. After a handful of cuts last year, Fed policymakers have held rates steady this year as they wait to see the impact of tariffs as well as the administration’s overall tax and spending policies. This has angered Mr. Trump, who regularly cites rate cuts in Europe when criticizing the Fed for not lowering borrowing costs.

In Europe, central bankers have repeatedly cut interest rates as price growth has slowed and economies have weakened. Stronger currencies have made imports cheaper, while European officials are worried about a flood of cheap goods from China that may be redirected from the United States, after tariffs were raised substantially on Chinese imports there.