Central bank governors from European countries are currently attending the Spring Meetings organized by the International Monetary Fund and the World Bank in the US. According to sources, their confidence in the European Central Bank (ECB)'s interest rate cut in June is growing stronger.
Data from the eurozone indicates that business growth in the region has stalled this month, wage growth has slowed significantly, and inflation in Europe continues to decline, creating conditions for an interest rate cut.
Additionally, as the 20% temporary tariff imposed by US President Trump on European goods is lower than the ECB's expectations, the ECB anticipates that the EU will not retaliate in the short term. Therefore, it is unlikely that European inflation will experience significant upward momentum in the future.
Under these circumstances, many ECB policymakers believe that at the interest rate-setting meeting on June 4, the ECB will update its economic forecasts and is more likely to decide on a 25 basis point interest rate cut. Earlier this month, the ECB implemented its seventh interest rate cut, lowering the benchmark interest rate to 2.25%.
Increased Likelihood of Interest Rate Cut
From a macro perspective, due to Trump's inconsistency on major decisions, the US's financial status as a global safe haven has been weakened, leading to a decline in energy prices and a depreciation of the US dollar against the euro. This has increased downward pressure on inflation in the eurozone.
This has also alleviated concerns about inflation among some of the more hawkish members of the ECB's Governing Council, thereby removing some obstacles to an interest rate cut.
However, despite the growing confidence within the ECB for a June interest rate cut, officials are not prepared to implement a significant cut, believing that a 50 basis point cut would trigger unnecessary market speculation.
Moreover, officials emphasize that they remain open to an interest rate cut in June, as there is still over a month before the ECB makes its decision, and Trump's erratic policy stance makes the economic future difficult to predict.
Gediminas Simkus, a member of the ECB's Governing Council and President of the Bank of Lithuania, stated on Friday that the ECB still has room for further policy easing and expects it will not trigger financial instability or economic overheating. Given the current data available, he does not rule out the possibility of two ECB interest rate cuts this year.