(Reuters) -Euro zone policymakers cut rates last month to prevent an unwarrented tightening of monetary conditions and in the face of elevated uncertainty around trade, the accounts of their June 3-5 meeting showed on Thursday.
The ECB cut interest rates for the eighth time in a year last month but signalled a pause in any further easing as inflation is already back at target and erratic U.S. trade policy creates too much uncertainty.
“Members underlined that the outlook for the global economy remained highly uncertain,” ,” the ECB said. “Elevated trade uncertainty was likely to prevail for some time and could broaden and intensify.”
A pause in July has become an even greater certainty in the weeks since the June meeting as the majority of policymakers have lined up behind a hold on the premise that key data and clarity on trade talks will not become available by their meeting.
Markets are also on the same page. Investors only see only one more cut in the ECB’s 2% deposit rate, sometime towards the end of the year, before policy tightening in late 2026.
“Indicators for April and May already suggested some slowdown,” in the global economy, the ECB said.
Although most policymakers argue that the ECB has essentially delivered on its target, some, including Finland’s Olli Rehn, Portugal’s Mario Centeno and Belgium’s Pierre Wunsch have warned about the risk of inflation going too low, requiring even more support.
Indeed, price growth is projected to dip below the ECB’s target later this year and stay under 2% for 18 months on a strong euro, low energy costs, and cheap Chinese imports, before coming back to target.
Others, however, warn that deglobalisation, a green transition and population’s ageing, will raise price pressures further out and the ECB could soon face above target inflation, once again.
(Reporting by Marc Jones; editing by Yoruk Bahceli)
Comments