The European Central Bank cut interest rates by a quarter-point Thursday, responding to signs of deteriorating activity and weakening inflation despite bond-market turmoil over plans for a splurge of spending.

The European Central Bank cut interest rates again on Thursday but warned of "phenomenal uncertainty" including the risk that trade wars and more defence spending could fuel inflation, raising the prospect of a pause in its policy easing next month.

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