The European Central Bank cut interest rates as expected on Thursday and kept the door ajar to more, even as a looming trade war with the U.S. and plans to boost military spending drive Europe's biggest economic policy upheaval in decades.

The bank cuts rates from 2.75% to 2.5% but faces pressures from threatened US tariffs and plans to boost military funding.

FRANKFURT — The European Central Bank cut its key deposit rate by 25 basis points to 2.50 percent, but its boss, Christine Lagarde, said the Bank may pause cuts as growing uncertainty clouds the economic outlook.

A 25 basis point cut to the ECB deposit facility rate is widely anticipated, marking the seventh cut in the current cycle. Click to read.

Euro zone inflation dipped a bit less than expected last month but its most closely watched component also dropped, sealing the case for another ECB interest rate cut on Thursday and solidifying bets for further policy easing in the coming months.

The euro touched a four-month peak against the U.S. dollar on Thursday after the European Central Bank cut interest rates for the sixth time in nine months, as expected, but revised higher its near-term inflation forecast.

The European Central Bank cut interest rates as expected on Thursday and kept the door ajar to more, even as a looming trade war with the U.S. and plans to boost military spending drive Europe's biggest economic policy upheaval in decades.