6 June | Euro

ECB cuts interest rate and signals potential pause — Reuters

ECB cuts interest rate and signals potential pause — Reuters

The European Central Bank (ECB) cut its deposit rate for the eighth time in a year, lowering it from 2.25% to 2.0%, Reuters reports. This level is in the middle of the "neutral" range, meaning it neither stimulates nor restrains the economy. The move reflects the central bank's growing confidence that inflation is under control, even as pessimism about the eurozone's GDP growth prospects has increased amid trade tensions with the United States.

ECB President Christine Lagarde expressed a positive view of the current monetary policy direction, emphasizing that the decision to cut rates at Thursday's meeting was made with only one dissenting vote. Her comments helped the euro rise 0.6% to $1.149, the agency added.

In response, traders lowered their expectations for further monetary policy easing by the ECB this year. The yield on 2-year German bonds rose by 5 basis points to 1.846%, according to Reuters. However, Goldman Sachs still expects two more ECB rate cuts this year, potentially bringing the rate down to 1.5%, due to ongoing trade uncertainty.

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