Possibility of ECB rate cutting pause after June meeting increases – Reuters

The European Central Bank (ECB) has made seven interest rate cuts over the year as inflation in the region approaches target values while economic growth is sluggish. The regulator will hold its next meeting on June 5. However, as noted by Reuters, at the moment the ECB officials are discussing the monetary policy prospects not for June, but for the following months.

As ECB board member Isabel Schnabel said, the new US tariffs pose risks of higher inflation in the medium term, despite their short-term disinflationary effect. This justifies the need for an early pause in the rate-cutting cycle.

Her colleague Klaas Knot also warned of longer-term risks. He cites the fact that trade barriers lead to increased production costs, affecting the price of manufactured goods.

As emphasized in the Reuters report, the medium-term outlook is a priority for the ECB, as its policy affects prices with a lag of 12–18 months.

Analysts at Societe Generale believe that the question now is whether the ECB is willing to “ignore” this period of subdued short-term inflation expectations. As experts added, under current conditions, the need for a July rate cut is not strong.