Back to that US GDP reading, at a 2.3% annualised rate for the fourth quarter it was the weakest end to a year since 2018.

Samuel Tombs, chief US economist at Pantheon Macroeconomics, said that the world’s largest economy was held up by the consumer, but that may not last. He wrote:

Economic growth became increasingly reliant on households last year, with the 4.2% surge in consumers’ spending in Q4 driving essentially all of the overall increase in GDP, offsetting a big drag from inventories and weakness in investment.

However, we would caution against concluding that underlying domestic demand remains unassailably strong. We think that a substantial share of the gain in consumption in Q4 reflected households pulling forward purchases in anticipation of tariffs threatened by the new administration.

“Consumer spending remained resilient, while investment was weaker,” said Richard Flax, chief investment officer at Moneyfarm, an online wealth manager.

Despite [the weakening growth], the US economy has managed to avoid the long-feared recession following the Covid-19 pandemic. Investors are now trying to determine if the Federal Reserve will begin cutting interest rates again in 2025, after maintaining them on Wednesday. In a press conference, Powell stated that the economy “remains strong” while inflation “remains somewhat elevated.”

The last questions focus on real incomes and Bulgaria’s economic convergence with the EU.

Lagarde says that there has been a catch-up in real incomes compared with pre-pandemic levels. She says that she hopes that consumers will spend more (rather than saving) despite “a degree of uncertainty about European political developments”.

The convergence between Bulgaria and the rest of the EU is going well, she says.

And with that the press conference is over.

The next questions covered her discussions with European Commission president Ursula von der Leyen and the relationship with the US Federal Reserve after it withdrew from a green policy forum.

Von der Leyen gave a presentation about the Commission’s policies on restoring competitiveness and innovation, but also to hear from ECB governors, Lagarde says.

On the Fed, she says that there is “huge value” in the Network for Greening the Financial System, from which the US central bank withdrew. It has “great value” for policymakers, she said.

The next question goes back to the neutral rate debate.

Christine Lagarde says the debate about what the neutral rate is is “entirely premature” because European monetary policy is still restrictive.

She says that it’s not possible to say whether the bank would lower rates below the notional netural rate to stimulate growth. She says:

I cannot tell you that!

Lagarde is asked if the eurozone economic recovery is delayed.

First of all, there is recovery, she says. The economy is not at potential yet, but it is certainly a recovery, she says. The ECB has good reason to believe that consumption will pick up, and the weak fourth quarter in the eurozone does not reflect the whole year of 2024.

Recovery there is; stagflation there is not.

Asked about recent bond yield increases that have troubled governments around the world (including the UK), she says that most of that is “largely spillovers” from the US as investors adjusted to Trump’s inflationary policies.

Lagarde is asked whether it is realistic to believe that exports will contribute to economic growth in light of Trump’s tariffs, and why the ECB didn’t discuss a bigger cut of 50 basis points.

Lagarde says:

We did not even utter the two numbers five-zero. 50 was not in the discussion at all.

On exports, she says they analyse uncertainty around trade as a potential risk, but they don’t have enough certainty on Trump’s trade policy to be confident.

There are rumours, there are statements, there are assumptions, but we don’t have any clear, tangible numbers.

By March, “we will still be plagued by uncertainty” on trade, Lagarde says.

On to the questions. Lagarde is asked about the future direction of interest rates and the neutral rate (at which policy is perceived as neither inflationary nor disinflationary).

All governors supported the ECB’s position in a unanimous vote.

She says the ECB is still in “restrictive” territory.

We know the direction of travel, Lagarde says, but emphasises that the pace will depend on data that comes in after that.

And on the neutral interest rate, Lagarde says that the ECB will publish details of changes to the estimated rate.

Greater friction in global trade could weigh on growth, Christine Lagarde said.

Global economic risks “remain tilted to the downside”, she said. Heightened geopolitical tensions could increase inflation if it pushes up logistical costs.

However, she did not come down either way on whether Trump’s proposed tariffs will add to eurozone inflation. She said:

Greater friction in global trade would make the inflation outlook in the euro area more uncertain.

Inflation is expected to fluctuate around its current level in the near term, Lagarde said.

Recent signals point to moderating wage pressures. Most measures of longer-term inflation expectations remain around 2%.

European Central Bank president Christine Lagarde has started a press conference on the decision to cut interest rates.

She is speaking at a press conference in Frankfurt after the European Central Bank’s announcement. We will bring more details as they come.

Melanie Debono, senior Europe economist at Pantheon Macroeconomics, another consultancy, has done a bit of central bank rune-reading.

Her verdict is that the ECB is sticking to the same path outlined in December. She wrote:

The key line in the decision statement is unchanged, which means that it still includes little in the way of forward guidance, instead pledging data-dependency. It again states that “The Governing Council is determined to ensure that inflation stabilises sustainably at its 2% medium-term target. It will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance.”

Recall that the text was edited in December to remove the reference to the need for a “sufficiently restrictive” policy rate. These words were removed to pave the way for further easing. We continue to look for the ECB to trim rates twice more in the current easing cycle, specifically by 25 basis points in March and in June, such that the deposit rate reaches a terminal rate of 2.25%.

Back to the European Central Bank, Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics, a consultancy, said the rate cut was “no surprise”.

The accompanying statement implies that more cuts are coming, as is widely anticipated. We think the bank will have to lower interest rates further than most investors expect.

The statement is very similar to last month’s. It describes domestic inflation as “high” but notes that this is mostly due to the lagging components of inflation. The overall tone shows that policymakers are confident that inflation will soon return sustainably to the target.

The euro has remained steady in the minutes after the European Central Bank made an announcement firmly in line with market expectations.

The euro is down by 0.1% today against the US dollar, with only a marginal uptick since the announcement was published.

European bond yields have remained steady as well. Reuters reported:

The German 10-year bond yield, the benchmark for the euro area, was last down six basis points [0.06 percentage points] on the day at 2.51%, having dropped earlier after weak growth data.

Let’s get the lay of the land ahead of the European Central Bank’s interest rate announcement at 1:15pm GMT.

Economists and investors will be taken by surprise if the ECB does not cut its deposit rate by 0.25 percentage points (25 basis points), down to 2.75% from 3%.

The bank, led by Christine Lagarde, cut interest rates four times in 2024, down from 4%. The most recent cut was in December last year.

The ECB is expected to continue further down that path this year, as many of Europe’s major economies struggle with tepid growth and political volatility.

Jim Reid and analyst colleagues at Deutsche Bank said that a 25 basis point cut is widely expected. They wrote:

So the bigger question will be how long they’ll continue to cut rates, particularly with core inflation still lingering above 2%. For today, our European economists share that view expecting another 25bp cut, and think the description of the policy stance will be unchanged relative to the last meeting in December. However, the main risk for them is that the ECB will tweak the description of recent data in a hawkish-leaning direction.

Another key issue will be the judgement from Lagarde on the likely impact of Donald Trump’s tariff policy – although given that his administration has not revealed any details there will be some uncertainty from the ECB.

Holger Schmieding, an economist at Berenberg, an investment bank, said:

For the Eurozone, the impact of US tariffs would show up mostly in less growth rather than in changes in prices. As a rough guess, a 10% US tariff on all imports from the Eurozone and the ensuing uncertainty about future US-EU commercial relations could reduce Eurozone growth by 0.3-0.5 percentage points within one year after the start of such a trade war. For the ECB, this would be an argument to cut rates below the 2.25% which we currently project as the trough for the deposit rate.

Before the European Central Bank’s interest rate announcement at 1:15pm GMT (2:15pm in Frankfurt), let’s have a quick round-up of some of the US tech results from last night.

Questions over multibillion-dollar spending on AI still hang over the US big tech, spurred by Chinese start-up DeepSeek’s shock to the US stock market just days ago. But the companies still reported relatively solid earnings.

Microsoft beat market expectations with earnings per share of $3.23, an increase of 10% on a year earlier. Chief executive Satya Nadella was bullish about the prospects for AI spending. Its share price fell 4.2% ahead of the Wall Street opening bell.

Tesla shares are up 2% in pre-market trading after the electric carmaker’s boss, Elon Musk, said that the cheaper Cybercab model would start production next year. Musk’s vocal support for Donald Trump has been a key driver of the company’s stock market surge since November.

Facebook owner Meta’s share price has risen 1.2% pre-market after it beat fourth-quarter revenue estimates. However, it predicted sales in the first quarter of 2025 might miss estimates. Its results were somewhat overshadowed by the news that it had agreed to pay Donald Trump $25m to settle a lawsuit. Meta boss Mark Zuckerberg has sought a closer relationship with Trump.

American Airlines shares are down in pre-market trading, after one of the company’s aircraft, carrying 60 people, collided in mid-air with a US Army helicopter in Washington DC.

Local media have reported that at least 30 bodies have been recovered from the Potomac river, where the plane crashed after the collision.

Video footage shows the two aircraft colliding in the darkness, with an explosion before both aircraft fell.

American Airlines shares are down 2.7% in pre-market trading, according to MarketWatch data. So far there is no indication of any fault on the part of the airline, with investigations into the disaster at an early stage.

Shell has given its investors a multibillion-dollar windfall despite reporting weaker-than-expected profits of $23.7bn (£19bn) for last year as global oil and gas prices tumbled.

Shareholders of Europe’s biggest oil company are in line for a 4% dividend increase alongside share buybacks of $3.5bn for the last three months of the year.

This marks the 13th consecutive quarter in which Shell has given its investors buybacks of more than $3bn, despite falling earnings from its oil and gas.

The company reported adjusted annual earnings of $23.7bn for 2024, narrowly missing the forecasts of City analysts who had expected an annual profit of just over $24bn for the year.

You can read the full report here:

US economic data is also due later today, during the European Central Bank’s press conference.

Unlike Europe, the US GDP data is expected to show an economy that was performing well during the last full quarter under former president Joe Biden. Economists expect the data to show growth of 2.6% during 2024.

That has not stopped Donald Trump from griping about the Federal Reserve’s decision last night to leave its interest rates on hold.

Posting on his social network, Trump wrote:

Because Jay Powell and the Fed failed to stop the problem they created with Inflation, I will do it by unleashing American Energy production, slashing Regulation, rebalancing International Trade, and reigniting American Manufacturing

Trump has previously called for the Federal Reserve to cut interest rates. That makes his complaint about the Fed’s handling of inflation somewhat contradictory: the central bank held interest rates steady rather than cutting in an effort to push inflation down.

And many economists believe that several of Trump’s policies could themselves be inflationary. Most notably, tariffs are almost always passed onto consumers directly, raising prices of imports or forcing them towards higher-priced products from their home country.

Jerome Powell, the Fed chair, last night declined to provide “any response or comment whatsoever” on the president’s public demands for lower rates. During a press conference, he said:

The public should be confident that we will continue to do our work as we always have, focusing on using our tools to achieve our goals.

If the European Central Bank does not cut interest rates this afternoon it would count as a real shock.

The eurozone economy is already struggling, and the prospect of US tariffs further hitting growth is adding to worries for politicans and central bankers.

Neil Birrell, chief investment officer at Premier Miton Investors, said:

Eurozone GDP stagnated in the fourth quarter, yet again showing that the economy is in need of some stimulus. It’s a tough outlook globally at present and uncertainty over White House policy measures aren’t helping. The political issues in Germany and France are adding to the strain, creating a cocktail that is making it difficult for businesses and consumers alike. The ECB will no doubt step up the plate to help out.

The euro has edged down today, with most of the movement coming at 9am after the weaker-than-expected German GDP reading.

But it has not been a dramatic shift: the euro is down 0.1% against the US dollar at $1.04. Traders will wait for Christine Lagarde’s comments at the European Central Bank press conference this afternoon.

Against the pound the euro has fallen by 0.2%. A pound buys €1.20.

It was a flash reading on the Eurozone economy, so we don’t have the details on what the drivers were. But it’s clear that it was a weak end to 2024.

But the European Central Bank might be able to spur a bit of economic growth in the eurozone with looser monetary policy.

Charlie Cornes, senior economist at the Centre for Economics and Business Research, a consultancy, said:

This marks a weak end to last year, following positive growth in the first three quarters of 2024. As a result, first estimates suggest that the currency bloc as a whole grew by 0.7% in 2024. Declining activity in Germany – the Eurozone’s largest economy – has weighed on the bloc’s growth, with German GDP contracting by 0.2% on the quarter. This suggests Germany has now seen annual declines in activity for two consecutive years.

In 2025, further loosening of monetary conditions is expected to provide a modest uptick in activity for both Germany and the Eurozone, with growth expected to amount to 0.3% and 1.0% respectively.

Germany has now gone two consecutive years with a shrinking economy.

The only reason that it has not been called a “recession” so far is that by convention that word applies to two consecutive quarters of contraction. As the below quarterly GDP chart from Trading Economics shows, the country has narrowly avoided that fate over the last nine quarters.

The economy has spent the last two years narrowly avoiding the “recession” word, but that will not be much comfort to its citizens – or to chancellor Olaf Scholz as he tries to retain his position at the German elections on 23 February.

The GDP data today show that the German economy shrank by 0.2% year-on-year in 2024, after shrinking by 0.3% in 2023.

It’s the first time since the early 2000s that the German economy contracted for two consecutive years, according to Carsten Brzeski, global head of macro at ING, an investment bank. He wrote:

The German economy has now been stuck between cyclical and structural headwinds for several years, and 2024 was finally the year that many politicians realised that the old macro business model of cheap energy and easily accessible large export markets was no longer working.

Ten years of underinvesting, deteriorating competitiveness and China’s shift from an export destination to a fierce industrial competitor have taken – and will continue to take – their toll on the German economy. Contrary to the early 2000s when Germany’s economic “sickness” or problem was high unemployment and a rigid labour market, the current problems are much more diverse and hence even more difficult to solve than they were 20 years ago.

Let’s also not forget that the external environment in the early 2000s was far more favourable for Germany, with China’s entry into the World Trade Organization and the EU’s enlargement. This contrasts sharply with today’s geopolitical tensions, a nearby war, and the rise of protectionism.

Germany’s Dax stock market index is also in on the party with a new record high, while Spain’s Ibex benchmark is at its highest since 2008, before the Eurozone crisis crunched its economy for a decade.

Spain’s stock market has risen strongly in the last couple of years, as the country has become the surprise leader of the European economy – with a growth rate far outstripping the EU’s largest economy, Germany.

However, the stock market has a long way to go before it surpasses that level, pumped up by the country’s housing bubble.

The biggest gainer on the FTSE 100 is telecoms company Airtel Africa. Its share price rose 7.2% after it reported a 20% increase in revenues for the first nine months of its financial year.

It is vying with St James’s Place, after the wealth manager enjoyed stronger inflows. Reuters reported:

Posts record funds under management of £190.21bn at 2024-end, above analysts’ views of £187.4bn, according to company-compiled consensus.