Jun
The ECB is set to lower the deposit rate to 2% this Thursday, completing eight cuts in a year of easing inflation. Although there has been broad consensus so far, this move could be the last in an increasingly volatile environment.
Internal Tensions Amid an Uncertain Outlook
While some members believe the current stimulus is sufficient, others warn that halting too soon could stall a still-fragile economic recovery. Concerns about a potential European fiscal rebound deepen the divisions within the Governing Council.
Trump Effect: A New Challenge for Monetary Policy
Tariffs proposed by Donald Trump could raise the cost of European goods by up to 50% in July. The ECB is analyzing scenarios, but projections remain fragile—one member estimates less than a 50% probability for the baseline scenario.
Trump Trusts Dialogue with Xi to Ease Tensions Despite New Standoff with Beijing
U.S. President Donald Trump expressed confidence in a potential his Chinese counterpart, dialogue…
Short-Term Inflation Tamed, Long-Term Outlook Uncertain
Falling energy prices and a stronger euro have moderated inflation, which Eurostat is expected to confirm near the 2% target. However, in the medium to long term, factors like military spending and geopolitical tensions may reignite inflationary pressures.
Warning Voices Within the ECB
Isabel Schnabel has cautioned against excessive easing, urging prudence. Nagel and Knot, from the Bundesbank and the Netherlands, share the skepticism. In contrast, Wunsch and Simkus are willing to support further stimulus if inflation drops too low.
ECB Adopts Data-Dependent Approach
Christine Lagarde will avoid committing to a roadmap at Thursday’s press conference. The ECB emphasizes that its decisions will be driven by data, not by explicit promises. Geopolitical uncertainty complicates any firm guidance.
Each Cut Will Be Harder to Justify
Economists like David Powell and Gilles Moec agree: the next steps will strictly depend on macroeconomic developments. While some forecast rates as low as 1.25%, achieving this would require overcoming growing internal resistance and clearer economic signals.
