ECB consensus builds for June rate cut but no appetite for big move, sources say

ECB Poised to Cut Interest Rates in June

By Francesco Canepa

WASHINGTON (Reuters) – European Central Bank policymakers are increasingly confident about cutting interest rates in June as inflation continues to decline. However, sources indicate there is little appetite for a significant rate cut, as reported by Reuters.

During the International Monetary Fund and World Bank’s Spring Meetings in Washington, ECB governors discussed a weakening economy in the euro zone and globally. Uncertainty stemming from U.S. President Donald Trump’s tariffs has dampened investment sentiments.

Recent data from the euro zone suggests a slowdown in business growth and a decrease in expected pay hikes, adding pressure on inflation. The impact of Trump’s 20% tariff on European goods was milder than initially anticipated, easing concerns about retaliation by the European Union.

With the upcoming ECB meeting on June 4, there is growing speculation among governors for a quarter-point rate cut. The ECB had already reduced its benchmark rate to 2.25% earlier this month. Despite the positive outlook, policymakers remain cautious given the unpredictable economic landscape post-Trump’s announcements.

The recent market volatility following Trump’s decisions has raised concerns about the U.S. economy’s stability and its safe-haven status. This has led to a decline in fuel prices and the dollar against the euro, exerting disinflationary pressure in the euro zone.

Looking ahead, uncertainties persist due to a fragmented global economy, increased imports from China, and Germany’s fiscal spending plans. As a result, policymakers are hesitant to consider a larger 50-basis-point rate cut, fearing it may alarm market participants unnecessarily.

In conclusion, while the ECB is leaning towards a rate cut in June, the decision will depend on evolving economic conditions and global developments. The ECB spokesperson declined to comment on the matter.

(Reporting by Francesco Canepa; Editing by Aidan Lewis)