FX.co ★ ECB Set to Lower Interest Rates

The European Central Bank (ECB) is anticipated to reduce interest rates by an additional 25 basis points at its meeting in June. This move aims to bolster economic growth amid declining inflation rates and the persistent uncertainties of global trade. Investors will be paying close attention to any modifications in forward guidance as there is a strong likelihood that the ECB might pause further rate cuts in July. Such a pause would allow them to reassess conditions post-summer, particularly to evaluate the ramifications of newly imposed US tariffs on both the Eurozone economy and inflation. This reassessment will also consider the ECB’s updated staff projections. Recent data released on Tuesday indicates that Eurozone inflation has decreased to 1.9% in May, falling short of the projected 2.0% and dropping below the ECB’s target for the first time since September 2024. On the employment front, joblessness remains near historic lows; however, recent Purchasing Managers’ Index (PMI) surveys suggest that the economy is still facing challenges.