ECB Set to Cut Rates, But Economic Uncertainty Clouds Outlook
According to a report by CNBC, the European Central Bank (ECB) is widely expected to cut its key interest rate by 25 basis points on Thursday.
Markets have priced in a 99% probability, based on LSEG data, that the move will lower the deposit facility rate to 2%, down from the mid-2023 peak of 4%.
Inflation Cooling, Growth Still Weak
The anticipated rate cut comes as inflation finally approaches the ECB’s long-standing 2% target. Preliminary data for May showed consumer prices in the euro zone rose just 1.9%, offering policymakers room to ease financial conditions.
However, the broader economic outlook remains uncertain. The euro area’s GDP grew only 0.3% in the first quarter of 2025, underscoring the region’s ongoing struggle to regain momentum.
Beyond Thursday: What Comes Next?
While Thursday’s rate cut appears all but certain, the ECB’s next moves are less clear. Policymakers must navigate a complex mix of domestic and global risks, including:
President Donald Trump’s tariff policies, which analysts warn could drag on European exports and growth.
Potential retaliatory trade actions from the European Union.
The economic impact of the EU’s ambitious rearmament spending and Germany’s fiscal overhaul.
This mix of disinflation, slow growth, and geopolitical uncertainty puts the ECB in a tough spot. While a single rate cut is almost assured, the pace and scale of further easing remain in question.
Markets will be watching ECB President Christine Lagarde’s guidance closely to gauge how far the central bank is willing to go in supporting the recovery amid growing global headwinds.
Kosta Gushterov
Reporter at Coindoo
Kosta has been a part of the team since 2021 and has solidified his position with a thirst for knowledge, incredible dedication to his work and a “detective-like” mindset. He not only covers a wide range of trending topics, he also creates reviews, PR articles and educational content. His work has also been referenced by other news outlets.
