The European Central Bank cuts its key interest rate by 0.25% on Thursday and warned that the major escalation in trade tensions is likely to lower growth in the euro area, and may drag down investment and consumption.

The bank said that the economic outlook as a whole is clouded by “exceptional uncertainty”, a sentiment echoing comments from Irish food businesses who have spoken to the Irish Farmers Journal over recent weeks.

The rate cut, taken by itself is good news for those businesses, particularly those in the dairy processing sector. Irish co-ops are entering the peak months for milk supply which normally correspond with the highest levels of working capital requirement.

Thursday’s rate cut mean that borrowing costs for that working capital should be around 1.75 percentage points lower than a year ago.

In real terms, this could translate to interest cost savings for co-ops of around a third when compared to last year.

In its outlook for inflation, the ECB again cited the uncertainty caused by the trade landscape. However, it said that falling energy prices and the rising value of the euro currency could mean inflation levels may fall further, allowing for more interest rate cuts in future. It warned that a severe disruption to trade flows and a fragmentation of global supply chains could add to inflation by increasing import prices.

Finally, the central bank said that extreme weather events, and the unfolding climate crisis more broadly, could drive up food prices by more than expected.