FX.co ★ German Bond Yields Fall to One-Month Low After ECB Rate Cut

The yield on Germany's 10-year Bund declined to 2.49%, the lowest since May 7, following the European Central Bank's (ECB) anticipated interest rate reduction and downgraded inflation forecasts for the upcoming years. The ECB now anticipates that headline inflation will average 2.0% in 2025 and 1.6% in 2026, a decrease of 0.3 percentage points from the March projections. This adjustment reflects expectations of lower energy prices and a stronger euro. Core inflation, which excludes energy and food, is predicted to average 2.4% in 2025 and 1.9% in both 2026 and 2027, remaining largely consistent with earlier predictions. Regarding economic growth, GDP is projected to increase by 0.9% in 2025, 1.1% in 2026, and 1.3% in 2027. Policymakers suggested that inflation is gradually aligning with the 2% medium-term target, aided by tempering wage growth and profit margins that are mitigating some cost pressures. Despite the rate cut, the ECB reiterated its commitment to a data-driven, meeting-by-meeting strategy for making monetary policy decisions.